NHS: Out-of-hours Cover
	 — 
	Question

Lord Naseby: To ask Her Majesty's Government what action they propose to take to improve confidence in the out-of-hours cover for patients in the National Health Service.

Baroness Thornton: My Lords, we are of course committed to improving the quality of GP out-of-hours services. Dr David Colin-Thomé, national clinical director of primary care, and Professor Steve Field, chairman of the council of the Royal College of General Practitioners, were asked to report on how best to strengthen this service. Their report was published on 4 February and the Government have accepted their recommendations in full.

Lord Naseby: Is the noble Baroness aware that that reply is not totally adequate? Why has it taken five critical reports-one from the Public Accounts Committee, two from the Health Select Committee, one from the two gentlemen to whom she referred and, above all, one from the coroner from Cambridgeshire-for this Government to take at least some action in this important area? Will she give a specific commitment on the three areas highlighted by the coroner? They are, first, to tighten up the clinical training of the out-of-hours doctors; secondly, to double-check that every doctor who does out-of-hours work speaks and understands English; and, finally, to instruct every primary care trust that they must work together to improve out-of-hours services for NHS patients.

Baroness Thornton: We are very aware that improvement was needed and we are very sorry that there has been a death. We have instigated a top-level investigation to deal with that. We are carefully considering the coroner's recommendations. It seems clear that all the recommendations, including those mentioned by the noble Lord, have already been taken into account and are part of the recommendations brought forward in the report by Dr Colin-Thomé and Professor Field. While the current system has safeguards, we recognise that these are not always carried out to the same high standard across the country. That is our priority and the challenge that we have.

Lord Forsyth of Drumlean: My Lords, will the Minister explain why the Government increased the remuneration of general practitioners enormously and at the same time agreed that they should be less available in the evenings and at weekends?

Baroness Thornton: Neither the general practitioners nor the noble Lord's party want to return to the old system of doctors being responsible 24 hours a day for their patients. It was recognised that that was not sustainable or in the best interests of the patients. As for the system that we have now, the National Audit Office has said that we are in "the forefront of thinking" about out-of-hours care and that we compare well in terms of cost and quality with the rest of Europe.

Lord Eden of Winton: Will the noble Baroness bear in mind the urgent need to consider adequate communications, particularly in relation to out-of-hours work? I am aware of a very serious case where, because it was the weekend, there was no communication from one hospital to another about a particular patient. That is not acceptable.

Baroness Thornton: The noble Lord is right: that is clearly not acceptable. One of the recommendations that the coroner made in the recent case was about having a national system for communications that would operate out of hours. We are working with the medical organisations to develop that national database and to consider what data should be placed on it.

Lord Tomlinson: Does my noble friend accept that, notwithstanding the National Health Service's occasional lapses from its normal high standards, the vast majority of people in this country, like me, who depend on the NHS are satisfied with the quality of treatment that they receive and would want to congratulate the Government on substantial improvements in the vast majority of NHS provision?

Baroness Thornton: My noble friend is correct. Indeed, our out-of-hours GP services are meeting the needs of patients, by and large, extremely well. We know that there are some problems around the country, as my noble friend has mentioned, but they will be tackled. This is an improved and improving service.

Baroness Barker: Does the noble Baroness agree with the statement made in the Health Select Committee report that the change to the GPs' out-of-hours contract suited no one but doctors? In her first reply, she said that the Government had accepted Professor Field's report in its entirety. What is the deadline for the implementation of the report's findings?

Baroness Thornton: We are working to do it as quickly as we possibly can.

Lord Patel: One of the problems about the quality and safety of out-of-hours cover provided by doctors coming from certain countries, particularly those within the EU-it happened in this case to be a German doctor-is that, once they are on the register of one country, they do not have to be registered here. That issue can be tackled by subjecting to assessment all doctors coming for their first employment in the NHS, even though they may have been British trained.

Baroness Thornton: The noble Lord raises an important point because, at the moment, as he will know, the medical qualifications of such doctors are assessed by the GMC but not necessarily their language qualifications, particularly if they come from within the European Union; those language tests depend on the PCT and the employers of the doctors getting it right. That is one of the main recommendations in the Thomé report. The noble Lord will also be aware that we are addressing the issue of how we can guarantee language testing as soon as possible, including raising this with European partners when the time comes to review the arrangements.

Lord Carlile of Berriew: Does the noble Baroness agree that one of the greatest models for out-of-hours services were the GP co-operatives pioneered in Bolton and elsewhere? Will she try to ensure that GP co-operatives are given every encouragement to re-establish themselves around the country? They are, after all, accountable to the people whom they serve.

Baroness Thornton: The noble Lord will know that, with my Co-operative background, I completely agree with him. Indeed, in a former life, I have been a great supporter of the GP out-of-hours services operating from south London. They continue to operate and have our full support.

Baroness Masham of Ilton: My Lords, does the Minister agree that, if out-of-hours doctors had lists of severely ill patients, that would lead to much greater confidence?

Baroness Thornton: Out-of-hours doctors are dependent on the information that they receive through the GP practices for which they do their work. However, I shall take back the noble Baroness's point and let her know the answer.

EU: International Development
	 — 
	Question

Lord Judd: To ask Her Majesty's Government what are their priorities for the future of European Union international development co-operation.

Lord Brett: My Lords, Her Majesty's Government's four main priorities for working with the EU on development are: greater EU leadership on the international stage, particularly on the millennium development goals; ensuring greater coherence between EU policies in support of development; to improve the quality of European Commission development and humanitarian assistance; and to work through the EU-Africa Infrastructure Trust Fund to accelerate integrated regional development in Africa.

Lord Judd: I thank my noble friend for that very encouraging reply. Does he agree that the issues of world poverty, together with those of climate change, trade and international security, are so complex that they simply cannot be solved on a basis of national programmes, and that international co-ordination is absolutely indispensible? Does he therefore accept that the EU has a key role to play in this, and that our commitment to its institutions is essential in ensuring that it happens properly?

Lord Brett: My Lords, my noble friend makes an important point. Indeed, 2010 is five years before the deadline for meeting the millennium development goals. The global development plan which we are seeking in partnership-starting with the DfID conference tomorrow which will move on from the European Union position towards an international view-is an attempt to identify where we are deficient. The EU is off track in meeting its interim ODA target of 0.56 per cent of gross national income by 2010 although the United Kingdom is on track. There is failure to meet a number of the millennium development goals and 1 billion people in the world are still hungry. There is a lot of work to do. However, I agree entirely with my noble friend that it can only be done in collaboration with our European partners and our international partners as well.

Baroness Rawlings: Given that in 2008-09 DfID contributed £1.15 billion to the European Commission's aid programme-about a fifth of DfID's total programme that year-what discussions have DfID Ministers had with the new Development Commissioner to make certain that British aid spent through the European Commission is spent effectively, swiftly disbursed and properly focused?

Lord Brett: My Lords, the Department for International Development and the Foreign Office have ongoing discussions almost daily with the relevant parts of the European Commission in Brussels, particularly in the light of the Lisbon treaty and the new arrangements that are in place. We certainly regard the Development Commissioner as extremely important. Of course we ensure that our money is spent on issues and in areas where we believe it will do the most to eradicate poverty. We have a strong record in this area. We have been at the forefront in seeking efficiency reforms within the European Union to aid that task, and we will continue to do so.

Lord Steel of Aikwood: My Lords, having returned just yesterday from Gaza, perhaps I may press the Government to be more robust on the continuing blockade of the Gaza Strip. Is the Minister aware that European aid funding has already been earmarked for more than 2,000 badly needed new houses, for which plans are agreed, but that the Netanyahu Government refuse to allow in the necessary construction materials? Will he follow the example of Vice-President Biden and make it clear, on behalf of our taxpayers, that their continuing behaviour is intolerable?

Lord Brett: I recognise the noble Lord's question if only because I think that, only a couple of weeks ago, I featured in giving an answer which was in almost the same terms. Yesterday's speech by Vice-President Biden was a very clear signal to the Government of Israel of not only the United States' concern but the concern of Europe and Britain, which we continue to press at every turn. The sooner that message gets home, the sooner we will see the reconstruction that will remove the misery that people in Gaza are living in, and the sooner we will be able to take that step towards meaningful talks on peace in the region.

Lord Pearson of Rannoch: My Lords, further to the question of the noble Baroness, Lady Rawlings, what proportion of our foreign aid is filtered through the European Union and how much of it goes astray? Would it not better to cut such aid and replace it with investment in agriculture and with free trade, which is often denied to the countries in question?

Lord Brett: My Lords, we spend money both bilaterally and multilaterally through the EU because the European Union makes policy on climate change, trade, agriculture and fisheries and is therefore in a unique position in terms of aid, trade and foreign policy. I can give a breakdown on the proportions of the money spent. I know that the noble Lord's enthusiasm for Europe is less than total, but international development is one area in which even he could not find much to criticise Europe. He makes the point about fraud, but the truth is that the amount of fraud is very small. The auditors have made a point about inadequate reporting by member states, and in 2009 they named Spain, Italy and Portugal as responsible for 80 per cent of the financial errors. However, actual fraud was found in only two cases among all the irregularities considered in 2008. Methinks that the noble Lord doth protest too much.

The Lord Bishop of Bath and Wells: My Lords, meeting the development goals is very important in respect of the young people of this country. What steps are the Government taking with the European partners to ensure that there is an appropriate education policy to enable our young people to be fully participant in the process of helping to achieve these goals?

Lord Brett: The right reverend Prelate makes an important point. Personally, I am quite encouraged. We, as people involved in politics, may sometimes despair at the willingness of young people to take a more serious attitude to the domestic political agenda, but I have found that when you talk to them about the international agenda, issues of climate change and poverty in Africa, there is a very ready understanding. The right reverend Prelate is absolutely right: we must continue and extend our efforts to ensure that all our young people are aware of the world in which they live, and the important part that they play not just in the United Kingdom and in Europe but in developing a better world for all of us.

Lord Lea of Crondall: My Lords, when it comes to the efficiency of expenditure, is it not the other way round from what the noble Lord, Lord Pearson, has said? If you go round different countries in Africa-as I do quite a lot as vice-president of the All-Party Group on Africa-you will find that the recipient countries have very limited resources. They do not want Britain, France, Germany, the Netherlands, Sweden and half a dozen other countries coming in, one after the other, with different priorities. Over the past few years it has been very noticeable, from Senegal to Madagascar, that the efficiency of the European channel lies in bringing things together and helping with technical assistance at the same time. It is a great step forward in most cases for the effectiveness of our expenditure.

Lord Brett: I agree entirely with my noble friend. Previously, when the European Union had delegations in member countries, those delegations were often regarded by various political actors and civil society in those countries as key, crucial and, in some ways, impartial in terms of the advice and guidance given. They were not the former colonial power and they were not people who came in with a particular nationality; they were seen as a European responsibility and as a European response to world problems. I think that we are enhanced by such arrangements. We will be even more enhanced when we develop properly the new system that Cathy Ashton will be responsible for.

Sudan
	 — 
	Question

The Earl of Sandwich: To ask Her Majesty's Government, in the context of the referendum in South Sudan in 2011, what steps they will take to assist in preparing for the consequences of greater autonomy for South Sudan.

Baroness Kinnock of Holyhead: My Lords, we are committed to supporting the south Sudan referendum in January 2011. We will continue to support institution building and development work in south Sudan, both before and after the referendum irrespective of its outcome. We will work with our international partners to press both parties to reach an agreement on critical issues including oil sharing, debt and border demarcation. We will also work with others to tackle corruption and encourage international business investment in south Sudan.

The Earl of Sandwich: My Lords, I thank the Minister for her reply and for her commitment over many years to Sudan. Would she agree that it is essential, immediately after the April elections, that leaders from north and south sit down to work out arrangements after the referendum, whatever the outcome, whether the people vote for unity or for secession? Are they not expecting all of us in the international community to take part in these arrangements? If they are not able to look forward, many of them will turn back to violence.

Baroness Kinnock of Holyhead: I thank the noble Earl and pay tribute to his work and commitment to Sudan. He is absolutely right to say that this is a critical year for Sudan. It is vital that the gains from the past five years of peace are not lost and can be built upon. The south must decide its own future in a referendum and, whatever the results of that referendum, it must be respected by all the parties and also by the international community. There will continue to be risks and uncertainties, and undoubtedly there will be delays, too. I reassure the noble Lord that, in recent days, we have seen a deal being made on the census and an agreement to provide extra seats in the national assembly, a code of conduct and so on. The international community has to play a serious and committed supporting role in all those processes. For that reason, we are upgrading our role in the south.

Lord Avebury: Will there be a more proactive role for UNMIS in south Sudan, particularly in the conflict zones of Jonglei and the Lake state? That would seem to be within the mandate of UNSCR 1590. Is the Minister doing anything to promote enhanced assistance to the Government of south Sudan for security sector reform, particularly for the enhancement of the capacity of the south Sudan police service?

Baroness Kinnock of Holyhead: I can reassure the noble Lord on UNMIS; we continue to support peacekeeping in Sudan and work very closely with UNMIS, which has a key role to play around the elections, as well as up to the referendum in January 2011. There will be that hiatus between the election and the referendum, when it will be very important for UNMIS to be very active.
	In the UN Security Council consultations and in meeting the new Special Representative of the Secretary-General, Haile Menkerios, the UK has emphasised and will continue to emphasise the importance of UNMIS in protecting civilians during this crucial time. Of course, the noble Lord is correct in drawing attention to the need for security at this time, as people need to feel confident that they can go about their business and that peace can be protected, as well as being able to be sure that their right to vote will take place in a peaceful way, without the beginning of any more conflict or tension in the south, where it is always possible that that may occur.

Baroness Cox: When I was in southern Sudan two weeks' ago, the Government of southern Sudan expressed great appreciation of the Minister's recent visit and of all the aid that Britain is giving in humanitarian assistance and capacity building. Is the Minister aware that southern Sudan suffers from a humanitarian crisis, with one in seven children dying before the age of five and one in seven mothers dying in childbirth and with only 20 per cent immunisation? Could DfID take an overview of the distribution of aid to ensure that it reaches all those in need, both to save lives and promote stability before the elections and referendum in the south?

Baroness Kinnock of Holyhead: I thank the noble Baroness. She makes the very important point that support for south Sudan and its Government is very important. We will provide approximately half of our £140 million development assistance for 2010-11 to south Sudan. UK funding will cover basic services, primary education, support for health infrastructure, along with efforts that will be made with water and sanitation. When I was in south Sudan recently, I was able to see the enormous needs that people have there. After the conflict, with the suffering that they have experienced in that country, they will expect to see a peace dividend. We all have to work together to ensure that we increase our staff in Juba and increase our support for the Government of south Sudan.

Lord Howell of Guildford: Would the Minister agree-as I am sure that she would-that, as we are a co-guarantor of the comprehensive peace agreement in the area, we have a special duty to do everything that we can to preserve the admittedly fragile peace in time for a referendum to take place? In the longer term, looking to the more optimistic side, would she agree that if, and when, southern Sudan opts through a referendum to be an autonomous, separate country, as seems quite likely, there is a potential future that we should encourage of working very closely with neighbouring Kenya, Uganda and Tanzania in a sort of revived east African federation, which would really bring substantial prosperity and development to the whole region, where at present we just have bloodshed and war?

Baroness Kinnock of Holyhead: I thank the noble Lord. Indeed, I was in Uganda last week and raised exactly those issues with the President and others. They are very well aware of their need to focus on the needs of south Sudan. I was also struck that Kenya's Prime Minister Odinga is very engaged as well. We can feel reassured that there is a strong political push now behind ensuring that that huge country which they border has the kind of stability and security that will only be possible if they engage with south Sudan and with whatever happens after the referendum.

Sport: Football Clubs
	 — 
	Question

Lord Dubs: To ask Her Majesty's Government what discussions they have had with the football authorities about the financial difficulties facing clubs.

Lord Brett: My Lords, in answering this Question, I first declare an interest. I am a lifelong Manchester United supporter and a long-standing patron of the Manchester United Supporters' Trust. I congratulate Arsenal on their victory last night.
	My honourable friend Gerry Sutcliffe, the Sports Minister, met the three football authorities-the Football Association, the Premier League and the Football League-on 8 February 2010 to discuss football regulation, governance and the national game.

Lord Dubs: I am grateful to my noble friend for that Answer. Is he aware that Portsmouth and a number of other football clubs are currently in serious financial difficulties; that British fans pay among the highest admission charges in Europe; that the money that many clubs take at the gate is pretty well all absorbed by the weekly wage bill; that some owners treat the clubs like playthings; that the Glazer brothers bought Manchester United with borrowed money and may damage that famous club through their efforts to recoup; and that we do not even know who owns Leeds United? It is a mess. Does he agree that British fans and British players deserve better than this? Will he encourage the football authorities to introduce a better system of voluntary regulation? Failing that, maybe the statutory path is the way we should go?

Lord Brett: My Lords, I can go two-thirds of the way with my noble friend. I certainly believe that the supporters of British football clubs deserve better. I also believe that it is the responsibility of the authorities to seek and provide better self-regulation. It is wrong to say that there have not been messages from government or, indeed, that there has been a lack of action. The football authorities have recently made significant moves to toughen regulations with early warning systems on tax debts, the introduction of transfer embargoes and help to monitor and curb club spending. I should like to pay tribute to the noble Lord, Lord Mawhinney, who is in his place, and to the noble Lord, Lord Triesman, both distinguished Members of your Lordships' House, who play a part in trying to bring that better self-regulation. We will continue to advise and assist, but it is not for the Government to regulate football. It is for the governing authorities and it is for the clubs to manage themselves.

Lord Mawhinney: I declare an interest, first, as chairman of the Football League and, secondly, as deputy chairman of England's 2018 World Cup bid. I thank the noble Lord for his kind words and for his recognition of the efforts that are being made to improve regulation in the world of football, on which I entirely agree with the noble Lord, Lord Dubs. Is the Minister aware that, in pursuit of our campaign against indefensible debt, the Football League has recently entered into an arrangement with Her Majesty's Revenue and Customs so that if, in any month, any of our clubs do not pay PAYE or national insurance, we apply sporting sanctions to them until they do pay?

Lord Brett: I was aware of the message that the noble Lord extends to the House. I am not sure that the whole House was aware of it. I am certainly not sure that the great British public are aware of it. The authorities are to be congratulated on that particular, and other, endeavours that they are making. Football is more than just another commodity. Football fans carry an allegiance. It is a community asset.
	In my lifetime I have lived through paternal ownership, vanity ownership and international financial ownership. The latter seems to me to carry some dangers and requires a much stronger self-regulation. In the absence of that, there will be continuing pressure on clubs from dissatisfied fans. Today three more clubs were in the High Court. Southend and Cardiff City were given extended periods of 35 and 56 days. We hope that they will escape from going out of existence. However, HMRC has a responsibility to collect money owed to the taxpayer. We cannot have clubs running on the avoidance of paying their obligations to the taxpayer.

Lord Grocott: My Lords, will my noble friend acknowledge that one club that is recognised by the Premiere League and others as being particularly well managed financially, and which lives within its means, is Stoke City? Does he agree that this is in no small part due to an excellent chairman, born and brought up locally and totally personally committed to the club, as well as a splendid manager and a very talented squad of players? Will he join me in wishing them all the best in tonight's match?

Lord Brett: My Lords, I recognise a totally impartial speech when I hear one. Stoke City is indeed a good example, but there are others. We should not necessarily pray in aid solely British ownership; I happen to think that Aston Villa is also a well run club, and it has an American owner. It is not about physical ownership. I think it is astonishing, as does everyone else, that Leeds United fans cannot know who the directors of Leeds United are, but those are the vagaries of Swiss law. I hope that the endeavours of Ministers for Sport over a number of years, which will continue when the current Minister for Sport meets the football authorities again in June, mean that we will continue on the right path. In the mean time, we will do all that we can do. The Inland Revenue, or HMRC, as I should insist on calling it, looks to assist clubs. It does not seek to force them into liquidation-although one, Chester City, went into liquidation today-when there are other ways of finding means of providing the money and paying back debts within a reasonable period.

Lord Davies of Coity: My Lords-

Lord Pannick: My Lords-

Lord McNally: My Lords-

Lord Howard of Rising: My Lords-

Lord Hunt of Kings Heath: My Lords, we have not heard from the Liberal Democrats yet.

Lord McNally: My Lords, is the Minister aware that Watford Football Club lost its third game on the trot last night and is now only two points from relegation, and that recently the noble Lord, Lord Ashcroft, invested 37 per cent in that club? Is there a pattern here of the noble Lord backing losers?

Lord Brett: My Lords, if I were to extrapolate from Watford to the noble Lord's other interests-that is, the funding of particular political party candidates in a number of seats-I would expect the crowd at Watford to rise by about two percentage points, but I doubt whether its performance would improve at all.

Concessionary Bus Travel Act 2007 (Variation of Reimbursement and Other Administrative Arrangements) Order 2010

Renewables Obligation (Amendment) Order 2010

Apprenticeships, Skills, Children and Learning Act 2009 (Consequential Amendments) (England and Wales) Order 2010

Local Education Authorities and Children's Services Authorities (Integration of Functions) Order 2010

Representation of the People (Scotland) (Amendment) Regulations 2010

Criminal Defence Service (Information Requests) (Amendment) Regulations 2010

Criminal Defence Service (Representation Orders: Appeals etc.) (Amendment) Regulations 2010
	 — 
	Motions to Refer to Grand Committee

Moved By Baroness Royall of Blaisdon
	That the draft orders and regulations be referred to a Grand Committee.
	Motions agreed.

Taxation (International and Other Provisions) Bill
	 — 
	Order of Commitment Discharged

Moved By Lord Myners
	That the order of commitment be discharged.

Lord Myners: My Lords, I understand that no amendments have been set down to the Bill and that no noble Lords have indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.
	Motion agreed.

Financial Services Bill

Bill Main Page
	Copy of the Bill
	Explanatory Notes
	Amendments

Committee (1st Day)

Clause 1 : Council for Financial Stability
	Amendment 1
	 Moved by Baroness Noakes
	1: Clause 1, page 1, line 12, at end insert ", and
	( ) where appropriate, direct the relevant authorities to act in accordance with the powers available to them under the relevant legislation"

Baroness Noakes: My Lords, it a pleasure to find oneself among friends again as we start this Committee. The Minister will recall our Second Reading, only two weeks ago. We had a constructive and good-tempered debate then, from which he will have learned that we have considerable concerns about this Bill. The fact that more than 330 amendments have been tabled so far shows how deep those concerns are.
	I move Amendment 1 and speak to Amendments 5, 20, 21 and 26, which are in this group. These amendments return to a question that has been asked about the tripartite arrangements, on and off, since 2007: who is in charge? The Treasury Select Committee in another place put that question formally to the Governor of the Bank of England when taking evidence for its report, The Run on the Rock, published in 2008. The governor famously replied:
	"What do you mean by 'in charge'?".
	In his later evidence, the Chancellor got close to saying that he was in charge when he said that,
	"the Treasury is the backstop, if you like, in all these things-to be intimately involved".
	The Treasury Select Committee concluded, in paragraph 284 of its report, that,
	"we are concerned that, to outside observers, the Tripartite authorities did not seem to have a clear leadership structure. We recommend that the creation of such an authoritative structure must be part of the reforms for handling future financial crises".
	Here we are again, 18 months or so later, considering a Bill that still does not address with clarity who is in charge.
	Last summer, the Government announced in their White Paper, Reforming Financial Markets, that they would set up the Council for Financial Stability. The Treasury Select Committee's verdict is set out in its 14th report of 2008-09 as follows:
	"we view the change as one which is largely cosmetic. Merely rebranding the Tripartite Standing Committee will achieve little by itself; what is required is an improvement in cooperation amongst its members, and a simplification and clarification of responsibilities for each of its members".
	Legislation cannot achieve better co-operation between the three parties, but we can expect legislation to clarify responsibilities. I regret that the Bill does not do that. Under the arrangements that existed before the Northern Rock crisis, there was a Memorandum of Understanding between the three bits of the tripartite authorities. If this Bill becomes law, there will be formal terms of reference issued by the Treasury, a draft of which is already available, and a Memorandum of Understanding which is not available.
	The existing Memorandum of Understanding skirts around the issue of who is in charge. It says that a standing committee is a,
	"principal forum for agreeing policy",
	and for "coordinating or agreeing action". The draft terms of reference for the Council for Financial Stability, according to paragraph 15, are as a "monitoring and coordinating body"; the following paragraphs talk about considering things and discussing things. I do not expect the Memorandum of Understanding which will complement this to fill the gaping hole headed "Who is in charge?".
	During the evidence sessions in the Public Bill Committee in another place, my honourable friend Mr Mark Hoban asked who was responsible for financial stability. The answer seemed to be that the Bank did a bit, the FSA did a bit and the Treasury does a bit. That is exactly the position that appeared to obtain before the Northern Rock crisis revealed so clearly that the tripartite arrangements did not work. When pressed, the representatives of the Bank of England and the FSA gave some very interesting evidence. The FSA said that its role was secondary and the Bank, when asked whether there was a first among equals, said that that was obviously the Chancellor. Then the FSA muddied the waters a bit more by putting in a written memorandum which said it would give "considerable deference" to the others, and repeated that its role was "secondary". We are concerned about the lack of clarity in this new council, and that is why I have tabled the amendments in this group.
	Amendment 1 adds a new function for the council to those listed in Clause 1(3). As well as keeping financial stability under review and co-ordinating action, my amendment would add directing,
	"the relevant authorities to act in accordance",
	with their powers. Amendment 26 is a related definition amendment. It is nonsense to think that the council is worth having at all if all it does is discuss and co-ordinate. Also, the council seems to be predicated on unanimity at all times and on all issues. Suppose that having looked at an issue-increased leverage in the banking system, perhaps, or the emergence of a new way to slice and dice risk-the council wants the FSA to alter the way in which it regulates banks. If everyone agrees, there is no problem. But what if the FSA did not agree, or did not think it was a high priority compared with the other activities, which of course go way beyond prudential regulation and supervision? My amendment allows the council to direct the FSA to act in accordance with its powers.
	In another place, the Minister criticised this amendment because it did not go far enough in providing what he called,
	"the necessary legal architecture for such an institutional framework".-[Official Report, Commons, Financial Services Bill Committee, 5/1/10; col. 236.]
	However, he went on to say that this was about whether decisions would be made by majority vote, and how decisions would be enforced. I hope that the Minister today has a more incisive critique. A Government who can draft a Fiscal Responsibility Bill which had no enforcement mechanisms whatsoever for its fiscal targets cannot complain about an amendment which seeks to make plain how the decisions are to be transmitted to the relevant tripartite authorities.
	An alternative formulation for this concept is found in Amendment 21, which is based on the concept of the council actually making a decision-a notable absence from the current Bill. Amendment 21 is in the form of a new clause to be inserted after Clause 2; this is a sharper-edged version of Amendment 1. I can see no problem with the council telling the FSA or the Bank of England what to do, provided it was within its own statutory powers. However, there is a problem if the FSA and the Bank of England gang up on the Treasury: it would be pretty odd if two quangos could tell the Treasury what to do. It would certainly be undesirable, because those decisions could well involve taxpayers' money and we do not want unelected bodies having powers like that.
	Therefore, I have tabled Amendment 20, which says that if there is no agreement on the exercise of the council's functions the Chancellor should decide. This deals with the question that eluded the Governor of the Bank of England and the chairman of the FSA back in 2007. It fills a gap in this Bill; it says unambiguously who is in charge.
	Lastly, Amendment 5 in this group amends Clause 1(6). Subsection (5) refers to the Treasury preparing a statement about the exercise by the council of its functions, and subsection (6) says what the statement may contain, which includes,
	"the objectives to be met by the Council",
	the matters to which it must have regard, and its procedure. However, as in a lot of this Bill there is a great big hole where one would expect some substance. Amendment 5 adds to the list in subsection (6) by adding that it may,
	"specify the responsibilities of each relevant authority in protecting or enhancing the stability of the UK financial system".
	Since the council itself has no powers other than of reviewing or co-ordinating under the Bill, it has to work through the FSA, the Treasury and the Bank of England, and my amendment simply reflects that.
	The draft terms of reference to which I referred earlier do include reference to responsibilities-in fact, more than a page is spent on this-and the earlier Memorandum of Understanding did the same thing. Specifying the responsibilities is clearly important to those who drafted these documents, so it seems curious that the Bill remains silent on the matter. Is it conceivable that the terms of reference could ever be drafted under Clause 1(5) without specifying a responsibility?
	My party does not favour this Council for Financial Stability, as was made plain at Second Reading. We will come to that later. For the present, the Bill represents the Government's decision to create this new council and our task in Committee is to make sure that, however ill conceived it is, the drafting at least deals with very important issues of substance which have been around for a long time and have been ducked. I beg to move.

Lord Barnett: My Lords, when my noble friend replies to this amendment-if he wants to bother-will he be so kind as to explain to the Committee why on earth the Government have decided to put it on the House of Lords Order Paper at all? We all know that there is not a cat in hell's chance of the Bill getting anywhere near the statute book when the House rises or prorogues shortly after Easter. Will the Minister kindly explain why the usual channels have not at least got together to see if there is a consensus on any parts of the Bill, so that they can go on the statute book? Why is he asking the Committee to bother looking at the Bill, knowing very well that there is no chance whatever of it appearing on the statute book?

Lord Newby: My Lords, I start by taking up the comments of the noble Lord, Lord Barnett. At one level it is highly amusing that we are wasting all our time today and on Monday debating the first few clauses of a Bill that is likely to collapse during the wash-up. However, there are, for example, 100 members of staff currently employed by the FSA who have been told that their employment will be transferred on 1 April to the new financial information body. They have been told this by the Treasury. They are now in considerable confusion as to what will happen to them. I took this, when I heard about it, to mean that the Government had already decided that they would call an election before 1 April; the Bill would be dealt with in the wash-up; the clauses dealing with this matter would be allowed to go through in the wash-up; and the staff's employment would, under TUPE, be transferred on 1 April.
	However, that is by no means clear, which is one reason why I support the comments of the noble Lord, Lord Barnett. It would be extremely helpful at this stage if we knew which parts of the Bill the Conservative Party will allow to go through wash-up and which parts it will kill. If we knew that, we would not waste our time debating the parts that will be killed, but we could at least attempt to improve those bits of the Bill which might survive.
	Moving on to the first group of amendments, it seems that the answer to the question posed by the noble Baroness about who is in charge is blatantly clear. The Chancellor is in charge. Whether the Bill is enacted in this form or with the noble Baroness's amendments, that is the fact. There is no real ambiguity about who calls the shots when things get difficult.
	My other problem with these amendments is that they seem to stem from what is, I think, a misunderstanding of the role of the Council for Financial Stability. It is not an executive body. It is a co-ordinating body. The Bank of England is not an arm of government in the same way that a department of state is. It is established under its own legislation. Although the Chancellor calls the shots, the Governor of the Bank of England has a statutory degree of independence, as does the head of the FSA. The principle established in the Bill codifies what already exists-namely that the three bodies which, between them, are responsible for financial stability meet under the chairmanship of the Chancellor and co-ordinate action. They all do what they do. The council does not have a staff of its own that will scurry around implementing things. The Government go away and implement those decisions that relate to them and the head of the FSA does the same for the FSA. Therefore, it seems to me that the phraseology in Clause 1(3) about reviewing and co-ordinating accurately reflects what the council is supposed to do.

Lord Hodgson of Astley Abbotts: My Lords, I support my noble friend's amendment. The noble Lord, Lord Newby, has just put a torpedo straight into the whole central purpose of this Bill, because he has described this cornerstone of the Government's plan-the Council for Financial Stability-as being nothing more than a talking shop. It is there to co-ordinate. We do not need this elaborate structure in order to achieve the things that he is talking about. The issue is that we are trying to look at this problem while the storm is still raging, and we are too close to the events to be able to judge them dispassionately and to be able to see the light and shade in them.
	The headline in today's Financial Times says:
	"Rally shows moral hazard is still alive".
	The article goes on to say:
	"In the US and UK, parts of the credit market only function because of the continuing intervention of taxpayers".
	We are trying to find a solution while the storm still rages.
	One of the lessons that could be drawn from the early part of the crisis-a crisis which is still continuing, as my noble friend has said-is that it was not clear what powers were available, who they were available to, whether and to what extent they were used, and how they interlinked. As I understood from what the Minister said in his Second Reading speech, the plan was for this new council to provide the overarch to this, and therefore this was the keystone, or cornerstone, of the new regulatory arch in the Government's vision.
	We all had concerns about the lack of consultation; several noble Lords from both sides of the Chamber raised this issue. Some of us pointed out that the Financial Services and Markets Act had been rushed in, and the lack of consultation about that had perhaps led to some weaknesses which were later discovered. We wondered whether the rush on this occasion might lead to similar mistakes being made. But, never mind: the Government were determined to bring this forward. The noble Lord, Lord Barnett, has questioned the relevance of so doing, but they have done so. They have taken the Council for Financial Stability as the key body.
	Clausewitz, the famous military historian, said:
	"Better a bad general than a divided command".
	This is currently, at best, a divided command, and at worst-as the noble Lord, Lord Newby said-a talking shop. I therefore think my noble friend's amendment is entirely relevant to our debates.

Lord Stewartby: My Lords, I was very interested to hear the remarks of the noble Lord, Lord Barnett, about the way forward from here to the wash-up. It would certainly be helpful if noble Lords in all parts of the House turned their minds to their potential attitude toward different parts of the Bill if it comes to a wash-up, which looks very likely.
	Thirty years ago, I was responsible for handling the Banking Bill, as it was, which became the Banking Act 1979. It went to wash-up, and lack of experience on my part definitely meant that I was not as clear-cut as I should have been on what I was trying to achieve in the discussion of the wash-up arrangements. We ended up leaving the situation with banks that could call themselves banks, and small banks which could only call themselves banks if they were based abroad. The ones in the UK were licensed deposit takers. It was because all this was done at great speed and with great complexity that we ended up with a system which did not work. We need to bear in mind the lessons from previous occasions of this kind.
	I turn to the roles and functions of different parties in the work of regulation and supervision. The Bill as drafted by the Government is extremely difficult to understand because it is full of statements about what people are expected to do and who should have responsibility for what. When I first looked through the Bill, I asked myself: could I readily determine how the behaviour of the parties concerned, if the Bill was enacted, would differ from their behaviour until now? I found that question difficult to answer. I tried to draw a grid to see who was losing functions and who was gaining them as a result of the Bill. I confess that the proposals are extremely difficult to understand, not least because of concepts which have been developing on this subject.
	I look at phrases such as "macroprudential stability", whatever that may be. You might get up in the morning and say, "How am I going to do some macroprudential stability today? Would it be better to wait until after lunch?".

Baroness Noakes: Always.

Lord Stewartby: There is a serious point. The Bill is very difficult to understand and to get a grip on regarding what will change and how the different parties will respond if it is enacted. I should be very grateful for anything that the noble Lord could do to ease my problems.

Lord Peston: My Lords, I did not take part in the Second Reading debate, although I have put in a lot of work reading the Bill. I did not take part precisely for the reason put to your Lordships by my noble friend Lord Barnett-namely, that it did not remotely seem to me that the Bill could go anywhere, and that therefore I should wait until we had won the election and could then reintroduce it. I am still very puzzled as to why we are putting in all this effort at this time-especially as my reading of the Bill is that it is an integrated whole. Rightly or wrongly, it is a Bill which fits together and therefore I am alarmed at the idea that any bit of it might be dealt with in the wash-up. It is the last thing that is needed.
	Having said all that, rather acerbically, I learnt something from the noble Baroness, Lady Noakes. I think that she referred to the Bank of England as a quango. She is entirely right, but it had never occurred to me that the Bank of England should be spoken of in that way-indeed, I regard that as extraordinarily disrespectful. I am also worried because, given the Opposition's commitment to abolishing quangos, if by some mischance they got elected, the Bank of England might be top of their list. It would certainly save a great deal of money.

Lord Higgins: My Lords, if one thing has been clear in the economic chaos of recent times, it is the failure of the tripartite agreement set up by the present Prime Minister. The curious thing is that effectively the Bill seeks to enshrine in legislation more precisely the same arrangement. It is not an effective way of proceeding.
	In particular, representations from the British Bankers' Association state that despite the provisions in the Bill,
	"The key here as far as we are concerned is that the responsibilities of each entity in times of crisis remain unclear".
	That is the case. I certainly understand the frustration of the noble Lord, Lord Barnett, and, as regards the remarks of the noble Lord, Lord Newby, it is absolutely clear that this part of the Bill is not something that we on this side of the House believe we should support. In particular when we come to later stages, it is absolutely clear that it was a mistake to take responsibility for what is now called macroprudential regulation-I am not absolutely clear what that means-away from the Bank of England. Far better that it should reside where it used to, particularly as much of this macroprudential regulation is involved to some extent with general macroeconomic management, where the FSA has no useful function to perform whatever.
	My noble friend is right to ask who is in charge. I worked for Unilever many years ago. It had a tripartite management board and no one was quite clear who was in charge. The crucial thing was to find out which of the three had the resignation letters of the other two in their right-hand drawer. In this context, it is fairly clear who is in charge: it is the Chancellor of the Exchequer. At the end of the day, he must be in charge since he is the one who is accountable to Parliament. If that is so, it is not clear what this amendment will significantly add. All it effectively says is that the structure is the same but this council will ensure they do their jobs properly. That is in essence what it seeks to do in legislative form. As I say, the structure itself is wrong and simply having a co-ordinating arrangement of this kind does not get us any further forward.
	Finally, as far as the structure is concerned, what is the position with regard to officials? Presumably the council is going to have some form of secretariat. As far as the operational decisions are concerned, are the Bank of England, the FSA and the Treasury going to have their own staff who all then put up briefs saying what ought to be put to the council, or are there going to be independent people in the council seeking to co-ordinate the representations which come up from the three bodies?

Lord Stoddart of Swindon: I did not take part in the Second Reading of the Bill either, but I have sat this afternoon listening to the debate and now need to make clear in my own mind exactly what is going to happen. We hear about a wash-up. We have got to be careful that a wash-up does not become a cock-up.
	Is Parliament going to have oversight of what is apparently going to be agreed by the Front Benches? After all, this is a significant and divisive matter. There are disputes and disagreements between the parties. I simply do not know how they can be resolved in a way that this House will agree to. When he comes to reply, the noble Lord must give us some assurance that Parliament is to continue to have an oversight of whatever is to be agreed by the Front Benches. Too often when the Front Benches agree the legislation becomes bad. Particularly on the question of financial controls of the institutions and banks, we need legislation which is seen to be good and which will work.
	Before I sit down, I have a question on the role of Parliament in this whole matter of control. All those institutions are responsible to Parliament but there is no mention, as far as I can see, of a significant role for Parliament. If Parliament had been more involved in the financial problems we have had, and in the run-up to them, the outcome might have been different-and better for this country. From now on, as we are clearly going to enter a new era, we must make sure that Parliament becomes far more powerful and watchful than it has been over the past years. I hope that the noble Lord, Lord Myners, will be able to give us some assurance about that as well.

Viscount Trenchard: My Lords, I echo what has been said by other noble Lords and express a certain amazement that we are spending so much time going through this Bill. I was very pleased to receive from the Minister an invitation to a meeting last Monday. I thought that perhaps he was going to tell us that the Government were going to give up this Bill and replace it with a much shorter one comprising the elements on which we all agree, getting it through before Parliament is dissolved. Unfortunately, the Minister's invitation to the meeting arrived after the meeting had taken place, so I was unable even to reply. I understand that some noble Lords were able to attend but that the answers they expected from the Minister were not forthcoming.
	Like other noble Lords, I express surprise that so much is made of the Council for Financial Stability, because this tripartite council seems to be exactly the same as the standing committee that it replaces. There is an awful lot of print to read but if you are saying that three people on a standing committee, which means that they meet regularly, are going to meet in another format to do precisely the same things, that seems to be no change at all. Furthermore, I understand that each of them may delegate their representative power to attend the council to anyone else in their organisation, so it may be that, busy though they all are, they may not meet together as the council that often.
	I was very surprised to hear the noble Lord, Lord Peston, express the view that the Bill is an integrated whole. To me, it seems to be a complete hotchpotch of scarcely related topics. First, there is the change of the standing committee to a tripartite council; then there is a large part about consumer education and the creation, even now, of another quango; then you have a section about strengthening the powers of the FSA; and then there is a part introducing to English law, for the first time, collective proceedings. That does not seem to sit very easily with the Bill because it represents a complete break with the past, which I think was the reason that the noble and learned Lord, Lord Goldsmith, decided to intervene at Second Reading.
	I also agree with my noble friend Lord Higgins that the Bill utterly fails to put the macro-prudential back together with the micro-prudential. Clearly, you cannot effectively be responsible for the macro-prudential if you have no ultimate power to control the micro-prudential as well.
	For those reasons, I support the amendments in the name of my noble friend Lady Noakes, which seek to include some clarity in the situation.

Lord Forsyth of Drumlean: My Lords, I wish to ask the Minister a question, and perhaps I should declare an interest as I am regulated by the FSA. My question arises from the speech of the noble Lord, Lord Newby, and relates to a matter that causes me some little concern. Although they may have changed, I understood that the conventions in the run-up to a general election-this certainly applied in my day-were that Ministers did not take decisions that would have an impact on a future Government and that looking to make major policy or expenditure decisions was discouraged.
	I also thought the convention was that people do not commit public resources and public money to policy changes before those changes have been approved by Parliament and received Royal Assent, whether or not a general election is imminent. I am very concerned to hear that people could be committing resources and making changes within the FSA in advance of this legislation reaching the statute book, particularly when it is perfectly obvious, as the noble Lord, Lord Barnett, has said, that it will not reach the statute book in its present form. It deals with an issue of great concern in our country, and one on which there is a great division of opinion between the parties. I believe that the electorate will pass the baton to my party, which will wish to take this forward. Why are we wasting taxpayers' money and resources? What are Ministers doing? Should the Minister not recognise the situation as it is and talk to the opposition parties with a view to getting a Bill which will meet those conventions and criteria?

Lord Northbrook: I, too, support the amendment in the name of my noble friend Lady Noakes on trying to clarify who is in charge. When the Council for Financial Stability was first discussed, it did not impress MPs on the Treasury Select Committee, who variously described it as totally underwhelming or rearranging three deck chairs on the "Titanic". As other speakers have said, the reality is that the heads of the tripartite authorities have already met in a standing committee. The main change seems to be that some of their deliberations, although not the market-sensitive ones, will be made public. As the financial crisis broke, the system was found totally wanting, and I cannot be impressed with what I see as tinkering with a broken system. Unless there is more clarity on its role, I cannot see how this is a good step forward.

Lord Howard of Rising: I support the amendment in the name of my noble friend Lady Noakes. As was pointed at Second Reading, by more than one speaker, the tripartite system has not worked, and that was before it was torpedoed by the noble Lord, Lord Newby. I find it inconceivable that the Government, having produced a system which has failed so obviously and so dismally, should persevere with it. It is all very well trying to blame the worldwide banking crisis for the problems experienced by this country's financial sector-certainly events outside this country have played their part-but the blame for not seeing what was coming, for not having a regulatory system better able to understand banking and the market place and better able to cope with and foresee the problems which will inevitably occur from time to time, lies fairly and squarely with the tripartite arrangement set up by the Government. As the noble Lord, Lord Desai, reminded the House at Second Reading, no matter what you do, the system will have crises and cycles. Not all countries have suffered as badly as the UK.
	There is a saying that remarriage is a triumph of hope over experience and reinventing the tripartite system is an example not just of hope over experience, but of the most wildly misplaced optimism over experience. I am sure that during his very successful and distinguished career in business, a career of which anyone would be extremely proud, the Minister never divided into three the running of those companies in which he was involved. His Lordship would have run a mile rather than have an enterprise with three chief executives.
	Direct lines of authority are the choice of virtually every single organisation of any sort, everywhere in the world. There is a reason for this. That structure is used because, over the centuries, people have worked out that it is the most effective way for their affairs to be managed. That does not mean that you cannot have checks and balances, but such checks and balances do not mean dividing authority. It is beyond me why, when there is a matter as important as the British banking and financial system, there should suddenly be a departure from a proven and sensible method of managing things. I look forward to hearing from the Minister how it is possible to justify compounding failure in the way suggested in this Bill and how he came to believe in the concept of dividing authority three ways when all his experience and the foundation for his success has been using the conventional method of a single authority.
	If one is stuck with having a tripartite system then the amendments tabled by my noble friend Lady Noakes will go some way towards correcting the inbuilt defects of the system. Rather sensibly, these amendments will have the effect of defining more closely the obligations and responsibility of each member of the authority. This is not a perfect solution; it is like putting a dressing on a wound when it would be better if the limb were amputated; but at least it may contribute towards reducing the weakness of the system if those involved have a clearer idea of their responsibilities and powers.
	Directing the relevant authorities to act in accordance with their powers and to specify their responsibilities will, I hope, tease out from the Minister how it is envisaged that the relevant authorities will work together, how they will relate to each other and who will do exactly what. It will be difficult when dealing with such a complex subject where there will be overlapping areas of authority and grey areas where there is no authority, but that is the inherent weakness of the system. Doubtless, if the Minister is a true believer in the tripartite system, all will be revealed. I look forward to hearing his answers to the very good points made by my noble friend Lady Noakes.

Lord Myners: My Lords, perhaps I should start by addressing the point made by my noble friend Lord Barnett about whether we are wasting our time in looking at this Bill in Committee. I disagree with him and with others who have asked a similar question. These are important measures. It is a good Bill that contains a number of important steps forward, such as consumer redress and steps to enlighten and inform shareholders on remuneration. I have today published guidelines for consultation on the publication of bank employees' remuneration. There are steps to provide a greater facility to control short selling and aggressive speculation, and the development of a new and empowered consumer education authority. These are all very important responses to the needs of our country and society, and the lessons that have emerged as a result of our experience of this global crisis.
	The Bill has already received serious scrutiny in another place, and will no doubt benefit from the scrutiny and improvement that the House will provide. It is surely our duty to continue to provide that important function to the legislative programme until an election is called. In response to the noble Lord, Lord Forsyth of Drumlean, about resources being deployed in anticipation of the Bill being successful, that is not the case. I do not believe that the Bank of England, the FSA or the Treasury are making significant resource commitments ahead of the Bill being passed. I am happy to give the noble Lord that assurance.

Lord Forsyth of Drumlean: I was responding to a point made by the noble Lord, Lord Newby, who said that not only were resources being committed but people were being told that their positions would change, and so on. Is that not correct?

Lord Myners: As the noble Lord, Lord Forsyth, knows, much as the noble Lord, Lord Newby, would make an excellent Minister in a Liberal Administration, I fear there is very little prospect of that happening and he does not speak for the Government in that respect. I suspect that the noble Lord, Lord Newby, will speak for himself on this, but there is also an extent to which there is a significant disruption to morale and the establishment of the FSA as a result of the uncertainty raised about its future by Mr Osborne's proposals. That is probably having a more deleterious and expensive impact on the FSA than anything envisaged in this Bill.

Lord Peston: My Lords, perhaps I may interrupt for a moment. The only way I can make sense of the Minister's reply to my noble friend Lord Barnett is that he is saying that the Government intend to get this Bill on the statute book before the election. Is he saying that we will go through Committee stage, that a Report stage will be scheduled-I cannot see in my diary where he will find the room-and that the Bill will then proceed to Third Reading? The point made by my noble friend is not against the Bill or a suggestion that this Bill is not important and that we would not want to see it on the statute book, but that it will not go on the statute book until we have had an election. That is what has troubled my noble friend and it is what, to put it mildly, puzzles me. Where is the time to do the job?

Lord Newby: I apologise for making another interruption, but I should like to clarify what I said about staff currently employed by the FSA who will be transferred to a new body. I know as a matter of fact that they have been told that on 1 April they will be TUPE-ed across into a new body, which assumes that the Government have in their mind that this Bill will reach Royal Assent by 1 April. I believe that that is what the FSA has been told. I think that some expenditure has been incurred-not a huge amount-because it has advertised for someone to head up this body. Although I may be mistaken, I think that interviews have taken place. It seems rather strange that all this is happening at this point. I cannot see for the life of me why there is a rush. I can assure the House that this is happening.

Lord Higgins: Before the noble Lord sits down, will he say to which body-

Lord Tunnicliffe: My Lords, perhaps I may remind noble Lords what the Companion says about interruption to speeches. It states:
	"A member of the House who is speaking may be interrupted with a brief question for clarification".
	They are not to seek new information or to make new speeches. With some trepidation I remind the House that this is Committee, Members may speak as often as they want and, when the Minister has finished, we can have this debate all over again within the rules.

Lord Higgins: It did not seem to me that I was in any way out of order. I merely wanted to ask the noble Lord, Lord Newby, whether he knows to what institution these members of staff are to be transferred.

Lord Newby: My Lords, I believe that they are to be transferred to the consumer financial education body.

Lord Myners: My Lords, I am not aware that that is the case. I certainly do not think that there is any basis on which anyone could have been told correctly that they would be TUPE-ed on 1 April unless that was conditional on the Bill receiving parliamentary approval. I can envisage a situation where that information could have been conveyed and shared with people, which would have been perfectly fair and reasonable in terms of giving them a good understanding and in addressing uncertainty. But I do not think that any clear indication could have been given that people will be TUPE-ed. If during Committee stage I am advised by officials that that is not the case, I will obviously immediately advise the House.
	Perhaps I may now turn to the noble Baroness's amendments. As the noble Lord, Lord Newby, said-

Lord Forsyth of Drumlean: I apologise for interrupting the Minister, but in all the hubbub he may have forgotten that he has not answered his noble friend's point on whether he expects the Bill to receive Royal Assent by 1 April.

Lord Myners: I was going to answer my noble friend's point at an appropriate stage. Perish the thought that I would seek to avoid doing that. I am not sure where the date of 1 April comes from, other than it being both April Fools' Day and my birthday. I have lived with that all my life and I am fairly impervious now to the jibes. We will make as much progress as Parliament permits. I am encouraged by the speed with which we are progressing on this first group of amendments and by the clear message that I am getting from the other side of a real determination to get on with this and to see Parliament make appropriate progress.
	As the noble Lord, Lord Newby, said-he put it better than I possibly could-the noble Baroness's amendments misunderstand the concept of the Council for Financial Stability. It is a consultative and co-operative body, not an executive body. I shall answer the questions a number of noble Lords asked about who is in charge, and I shall address the points raised by the noble Lord, Lord Higgins, about the resourcing for the Council for Financial Stability.
	Amendment 1 would provide for the council to be able to direct each member of the tripartite authorities. This together with Amendment 20, which provides the Chancellor with the ultimate power to direct the council, represents a different model to that which is proposed in Clauses 1 to 4. To set the context of the debate, I remind the House of what we are proposing and why. In reforming financial markets, the Government took a considered analysis of the financial crisis and identified reforms that were needed to strengthen the financial system for the future. In evaluating the existing standing committee and the wider tripartite arrangements it was clear that, while many different institutional frameworks exist in different countries across the world, no one model of financial regulation was successful in fully insulating a country from the crisis.
	The Government's position is that what the regulators do-their behaviours and the judgments they exercise-matters much more than the institutional framework within which they operate. However, we need an institutional framework which makes sense and has clarity. I fully agree with what the noble Lord, Lord Howard of Rising, said about the need for clarity and structures and I shall address that point in a moment. Change to the institutional system-moving specific responsibilities from one body to another-will not by itself make any difference, other than to cause a significant disruption at a time when attention should surely be focused on practicable, workable improvements to regulatory performance and decision-making.
	The same institutional functions-central banks, financial regulators, finance and economic ministries-are central to the maintenance of financial stability in every major economy. The UK is no different in this respect. The Bank and the FSA, alongside the Treasury, have key but distinct roles in protecting the financial stability of this country, each within its own individual remit. The Government have concluded that the existing tripartite framework is the right model and remain committed to the approach of having a single independent financial services regulator in the form of the FSA. We should always remember the confusion that existed before the creation of the FSA, with multiple regulators and inconsistent rules and principles. The concept of a single regulator has proved to be absolutely critical to efficient regulation; we should not dispense with it lightly.
	"Who is in charge?", is the question put by the Treasury Select Committee to the Governor of the Bank of England. In his precise way, he quite correctly said, "What do you mean by who is in charge?". He meant, "In charge of what?". His answer was clear that there was an understanding of who was in charge of each approach. This issue was raised by the noble Lord, Lord Northbrook, by the noble Baroness in her speech in support of the amendments and, in particular, by the noble Lord, Lord Howard of Rising, who questioned whether one would ever support one organisation with three CEOs. I agree that that would be a highly unusual structure; it is not one that I have ever attempted to date in my business career. However, this is not a single organisation: it is a co-ordinating body for three separate organisations, each of which has a clear role and each of which has a CEO or someone in charge.
	Let me recap. The FSA as an independent financial regulator is responsible for authorising and supervising financial firms and markets. It triggers the special resolution regime. The Bank of England, of which I and the noble Baroness have served as members of court, is an independent central bank and is responsible for providing liquidity assistance to the banking system. It has oversight of the interbank payment system and it is the resolution authority under the special resolution regime. The Treasury, as the UK's finance and economics ministry, is responsible for the overall institutional structure of financial regulation and the legislation that governs it. It is ultimately accountable to Parliament and responsible for decisions that have an impact on public finances, which I think answers the question that my noble friend Lord Stoddart of Swindon raised. The Bank of England and the Financial Services Authority are also accountable to Parliament and can be, and are, called to give evidence in this respect to the Treasury Select Committee. Their annual reports are also subject to parliamentary and other scrutiny.
	The key point is that these three entities, each of which has clear responsibility, are appropriately aligned and co-ordinated through the co-operative process proposed by the Council for Financial Stability. The council will be chaired by the Chancellor, who is ultimately accountable to Parliament and the taxpayer, but the council is not an executive body, as the noble Lord, Lord Newby, observed. There will be no votes. The council will have secretarial support, which will be provided by the Treasury. Over time, it might be concluded that it requires its own secretariat, but we have had two meetings of the council in shadow form to date which have worked rather well in accordance with the terms of reference and with secretarial support provided by the Treasury in the preparation of the minutes. The papers presented to the council come from the Bank of England, the FSA and the Treasury, depending on the specific subject being addressed.
	When it comes to clarity of how the model will work and who is in charge, we have clear answers; I do not believe that the Opposition have clear answers. They need to explain who in their model will be in charge. Will it be the Governor of the Bank of England? Will it be the Chancellor of the Exchequer? Simply proposing to move around the deckchairs by getting rid of the FSA and transferring its powers to the Bank of England, a step which fundamentally misunderstands the competency, structure and culture of the Bank of England, achieves no good purpose and certainly does not answer the question of who is in charge. If one achieves this move, I do not think that anyone believes for one moment that the current or any future Governor of the Bank of England would perform the role currently carried out by the chief executive of the Financial Services Authority. That role would still need to be performed. There is clarity under the current model as to who is in charge and what they are in charge of. If noble Lords reflect on what I say, I hope that they conclude that I have answered some of the doubts that they may have in this respect.
	The Government believe that the co-operative framework can be enhanced, however, through a more formal structure, with regular meetings, greater transparency over proceedings and clear lines of accountability to Parliament. This, I would say to the noble Lord, Lord Stewartby, is where the Council for Financial Stability represents a further step forward in the tripartite process. There will be more formality around the agenda for the quarterly meetings; there will be publication of minutes, which will provide additional transparency; and those minutes will allow for accountable and attributable comments to be reported, so that if there is a disagreement of emphasis it will be faithfully reported in the minutes. The Council for Financial Stability will also receive, after their publication-I emphasise that; I shall explain why in a moment-the reports which the Bank of England and the FSA publish on financial stability and financial risk assessment. We will debate those reports and will note any actions or views that they have in terms of mitigation required in response to an emerging risk.
	I emphasise that it is after the publication of the report because by ensuring that process is followed we do not fetter the independence of the Bank of England or the FSA to publish their own assessments of risk in the system and potential risks to stability in the future. Likewise, the Treasury will produce an annual report on the Council for Financial Stability which will review the operations of the council. I say to the noble Lord, Lord Stewartby, that this is a significant step forward in terms of transparency. It will ensure that if there are ever differences of opinion-and let us be frank, there will be circumstances in which the central bank might reach a different assessment of risk from the regulator or from the Treasury-they become public knowledge and become available for public discussion. I think that represents quite a material step forward.
	I refer here to the quarterly meetings. There will be other meetings in between which deal with specific issues relating to individual corporations or sectors. These will not be subject to normal public minuting because of the confidentiality involved. The noble Baroness will be tabling amendments in due course relating to some of those provisions. However, the annual report will, to the extent that it is possible, ensure that we also have public insight into the matters that are discussed in the non-standard meetings. For the time being we are having meetings on a monthly basis and we have had two already in shadow form: one of which was a quarterly strategic meeting, if you like, and the other was a more regular monthly meeting. We have published the minutes. They did not receive a great deal of attention, but they actually were quite thorough and quite detailed and gave a very clear indication of what was discussed at the council.
	The council will comprise the Chancellor as chair, the Governor of the Bank of England and the chairman of the FSA. As necessary it will be able to draw on external expertise. There is a facility where experts can be invited to come and present or give advice to the council and if the governor and the chairman of the FSA or the Chancellor are not available they can nominate deputies to attend. By ensuring that the date of meetings, particularly of the critical quarterly meetings, are set well in advance one would reasonably expect to have very high and consistent attendance.
	The council will be responsible for considering emerging risks to the financial stability of the UK and global financial system and co-ordinating an appropriate response by the UK authorities. It will deal with both immediate and operational issues and longer-term strategic issues. It is essentially a forum to bring together leaders of authorities responsible for financial stability and enable them to monitor emerging risks, analyse assessments of those risks and co-ordinate appropriate responses without encroaching on independence. The council will do this in partnership. The Bank of England is the independent central bank. The FSA is the independent regulator. The proposals are not about the council or the Chancellor having direct authority over other members. They are about a mature partnership. I am therefore unable to accept the noble Baroness's amendment because it essentially addresses a very different model from the one which we have in mind.
	Amendment 20 ploughs a similar furrow to Amendment 1. This time the amendment aims to make clear that where the council cannot reach agreement, the Chancellor is "in charge". This allied with Amendment 1 will provide the Chancellor with ultimate executive authority for financial stability and authority over the Bank and the Financial Services Authority. This is a very major step, and I really wonder whether the Conservative Party is minded to seek to exercise such authority over the Governor of the Bank of England. When I read comments from Mr Osborne about interest rates, I think that the Conservative Party is straying dangerously towards saying that it intends to take power away from the Bank of England or begin to direct it in respect of interest rates. I see shaking of heads from the opposition Front Bench; I am delighted to see that that is the case, as it would be a very dangerous move for the Conservative Party to contemplate. Certainly, it would not be consistent with the model that we propose for the Council for Financial Stability for the Chancellor to have the power to take ultimate executive decisions in respect of the FSA and the Bank of England.

Lord Forsyth of Drumlean: I shall resist the temptation to follow the Minister's political bait. He is waxing eloquently about this model and how it will work, with the three parties operating in co-operation. My noble friend Lord Higgins made the point as to how it will differ from what we have had before, and a number of other speeches have been made about that. When we had the tripartite group, if that co-operation was so important and critical, why did the principals-the governor and Chancellor-meet only on two occasions in the 10 years leading up to the crisis?

Lord Myners: I can speak to the effectiveness of the tripartite group during the middle and later stages of the financial crisis. I became a Minister in the Treasury in October 2008 and it seemed to me that the tripartite was in almost constant session for the next four months. I am not aware of the frequency of meetings before, but there is also provision for meetings of deputies, at which routine matters are conducted. I know that the Chancellor of the day and his predecessor had very regular meetings with the chairman of the Financial Services Authority, Sir Howard Davies, and with Mr Mervyn King, the Governor of the Bank of England.
	As I said, Amendment 20 ploughs a similar furrow to Amendment 1. It proposes an approach that the Government do not support. The model of the council is that of an effective forum for monitoring risk and co-ordinating a shared response. It is a model that has operated effectively during the crisis but the Government recognise that it can be improved upon. That is why the proposals are brought before the Committee today. I cannot support the noble Baroness in her amendment.
	Amendment 21 will provide further elements for the model for the council that the noble Baroness has put before the Committee in her amendments. The clause would give teeth to the decisions of the council and provide that the authorities should comply with these decisions. This amendment, coupled with Amendments 1 and 20, would effectively constrain the discretion of the Bank and the FSA as to how they perform their functions, as conferred on them by Parliament. That is why I continue to ask whether the Conservative Party is minded-even if not in the area of monetary policy-to seek to take powers away from the FSA or the Bank of England. Perhaps the noble Baroness will answer that point in her closing speech. Such an approach would be likely to be detrimental to the performance of those functions, because the Bank and the FSA would always be at risk of being second-guessed by the council and, ultimately, the Chancellor. I do not consider either of those outcomes to be desirable or consistent with the model that I seek to articulate. As I set out previously, in discussing Amendments 1 and 20, this is not the model that the Government are proposing. Our intention is that the council monitors and co-ordinates in a spirit of partnership, and that the members of the council take action as agreed between the parties. That action would not be driven by a statutory requirement but would be done on the basis of a co-ordinated and agreed approach. I cannot support the noble Baroness in her proposed new clause.
	I turn to Amendment 5. The draft of the statement provided for by Clause 1(5)-the council's terms of reference-is available on the Treasury website. It provides an overview of the authorities' financial stability responsibilities. This is intended to contextualise the detail on the council's objectives and procedures. The statement also sets out that the authorities intend to revise the Memorandum of Understanding between the authorities.
	The MoU between the Bank of England, FSA and Treasury was first agreed between the authorities in 1997, and updated in 2006. It sets out the roles of each authority and how they work together to pursue financial stability. The Government made clear in another place that, as suggested in the draft terms of reference, the MoU would be updated with consolidated details of each authority's role for financial stability. The Government recognise that this approach has not swayed the views of the House and that there is still a desire for the detail on roles and responsibilities to be included in the terms of reference. On this basis the Government are willing to accept opposition Amendment 5 and include the necessary detail in the statement produced under Clause 1(5).
	The noble Lord, Lord Hodgson of Astley Abbotts, referred to the fact that "the storm is still breaking". That is not how I see things. We must not be complacent but, in terms of the storm as I experienced it during the last couple of months of 2008 and the first two months of 2009, the weather conditions are much more tolerable now than they were. We have undoubtedly moved back to a position where the financial system and systemically important institutions are in a much stronger position in terms of funding, liquidity and capital than was the case. There is still scope to secure further improvement. I have answered the question of the noble Lord, Lord Stewartby, about where this council will be different from the previous arrangement. The difference will be in the transparency, the public minuting, the attribution of comments, the formal and open review of risk and the publication of an annual report.
	The noble Lord, Lord Higgins, asked about macro-prudential regulation. This is a very new concept to address an old problem. It is sometimes summarised in the press as taking away the punchbowl before the party has gone out of control or leaning against the wind. It will need a globally co-ordinated approach. It is high on the agenda for the G20 and the IMF. It raises some questions about whether monetary policy that targets consumer or retail inflation is necessarily appropriate as an instrument to address asset inflation, which was clearly at the heart of the crisis. Mr Greenspan has been very clear that this is something that was missed by the Federal Reserve. I am sure that other central bankers share a concern that they have yet to find the answer to that.
	I do not, however, agree with the noble Viscount, Lord Trenchard, that you cannot support macro-regulation and supervision without also being responsible for the micro. They are very different. Micro is about the regulation of individual institutions and judgments about their capital adequacy, the competence of the management and the sustainability and achievability of their business plans. Systemic risk is where the micros of individual institutions come together. Macro is about the broader economic context. You cannot establish macro policy without micro awareness. Nor can you have good micro-regulation focus, particularly on interconnectivity and complexity, if you do not also have macro awareness. The Council for Financial Stability will provide that overarching co-ordination. Under our structure, it is not necessary for micro and macro to be performed necessarily by the same bodies.
	My noble friend Lord Stoddart of Swindon asked whether Parliament will have a role in scrutinising the results of the wash-up. As the Committee knows, I am still relatively inexperienced-I think I am now right at the borderline of being able to use that as an excuse for not being quick enough on my feet in saying the right things. There are a number of things in Parliament that I have yet to experience, although I am looking forward with great excitement to the experience and joy of being re-elected to government in the next couple of months. But that is some time off.

Earl Ferrers: My Lords, is the noble Lord going to be elected to the Government?

Lord Myners: I apologise to the noble Earl, Lord Ferrers, for once again evidencing the fact that I still have much to learn. Of course I will not be elected, but I am looking forward, as I am sure the noble Earl understands, to the Labour Party being re-elected.
	I was going to say that I have even less experience of wash-up; in fact, it meant something very different to me until about a month ago when I began to hear the term being used. As I understand it, wash-up requires all Bills to go through their remaining stages in each House and therefore to be subject to whatever scrutiny Parliament is able to provide. At a certain point the usual channels will then address the issue of what is to be done with Bills that have not completed their full parliamentary process, but I suspect that almost everyone in the House knows more about the practice of wash-up than I do.
	With the exception of the noble Baroness's amendment, which I have indicated that the Government are happy to accept, I urge her not to press her other amendments.

Viscount Eccles: My Lords, before the Minister sits down, with regard to the question asked by the noble Lord, Lord Newby, I draw the Minister's attention to Part 2 of the new Schedule 1A, which is headed "Funding". New paragraph 11(1), headed, "Meaning of 'the relevant costs'", says:
	"In this Part of this Schedule 'the relevant costs' means ... the expenses incurred by the Authority in establishing the consumer financial education body",
	while new paragraph 11(2) says:
	"For the purposes of sub-paragraph (1)(a) it does not matter when the expenses were incurred".
	It is normal practice for this Government to write into Bills something that means that if they become Acts, all the expenditure that has been made before the Bill was passed will be whitewashed. I suspect that that is exactly what is happening on this occasion.

Lord Myners: I thank the noble Viscount, Lord Eccles, for that intervention. I am happy to reassure him and other Members of the House that 1 April, as referred to by the noble Lord, Lord Newby, is merely a number that has been used for planning-assumption purposes when the FSA is preparing itself for the creation of the CFEB. As I said earlier, no decisions or actions have been taken, and they will not be taken or implemented until legislation is passed.

Lord Stoddart of Swindon: My Lords, I will not delay the House very much longer.

A noble Lord: The Minister has sat down.

Lord Stoddart of Swindon: No, this is Committee stage; you can talk as many times as you like. The noble Lord should not delay the proceedings. I was going to remind the noble Lord, Lord Myners, that he is indeed privileged, as are the rest of us, in that, following dissolution, he will get a registered letter in the post containing his personal writ of summons, which I hope that he will be there to receive, open and, in due course, answer.
	However, I am still concerned about this question of wash-up. The Minister says that he has not heard the term before, but I have been around for a very long time and I had not heard it either until this afternoon-and I was a Whip in the other place. Apparently the parties are going to make decisions that then have to be agreed by both Houses of Parliament. I am concerned that both Houses will be stampeded into agreeing matters that should be properly considered over a period of time. That really concerns me, and it ought to concern the Committee as well.

Lord Myners: I note what the noble Lord says, which of course applies to this Bill and to others, but I understand that the practice of wash-up has been used by Parliament in the past in these situations. I am a regular reader of the excellent website Lords of the Blog, where the noble Lord, Lord Norton, regularly informs me on this and on other matters. While I note what my noble friend says, I have nothing further to add.

Lord Howard of Rising: I am not quite clear. Although the noble Lord says that this new council is not an executive body and is purely advisory, he also says that he disagrees with the amendments tabled by my noble friend Lady Noakes which seek to define what the authorities do. How will people know what to do when, for example, there is a crisis of confidence, as there was with Northern Rock, and queues form outside banks and people ask for their money but no one is quite clear about who is doing what on the day?

Lord Myners: My Lords, I have no doubt that the chairman and chief executive of the FSA, the governor and deputy governors of the Bank of England, the Chancellor of the Exchequer and his junior Ministers all know precisely what their roles are. They know where they operate with their independent executive authority and where they co-ordinate their actions through the tripartite organisation or through the new Council for Financial Stability. Nothing in the noble Baroness's proposals would in any way lead to a superior response in a situation such as that of Northern Rock.
	I listened very carefully to what the noble Lord, Lord Howard, said about the need for executive clarity and the avoidance of any confusion about lines of authority and accountability. Our structure delivers precisely that, whereas I believe that the noble Baroness's amendments, as I have suggested, obfuscate and confuse. They grant executive authorities and powers that the Council for Financial Stability is not designed to exercise.

Lord Forsyth of Drumlean: I do not wish to detain the Committee, and I think that there is general agreement that whatever we do will not make any difference to the passage of the Bill, as it is perfectly obvious that the Bill is not going to reach the statute book or go through all its stages. There is a kind of Alice in Wonderland feel to this debate. However, I am very surprised that the Minister does not know on how many occasions the tripartite group got together prior to the crisis. After all, that structure was put in place by the Prime Minister as Chancellor, and I suspect that the role that this Bill has to play is that of a fig leaf for the Prime Minister.
	I think that I am right in saying that there were only two occasions when the principals met under the old tripartite structure; that was the evidence which I think we received in the Economic Affairs Committee during our inquiry into banking regulation. I am very surprised if the Minister does not know on how many occasions it happened. I listened to his explanation of why my noble friend's amendments should not be accepted-it was very much based on the idea that those three parties working together and co-ordinating is essential to the proper conduct of affairs. If that is the Government's position, one is left to conclude that it is an open acknowledgement by the Government that they took their eye off the ball when they were not meeting as a tripartite group at principal level in the run-up to the crisis.
	My anxiety concerns the question of why setting up a formal structure-with all of the costs, paraphernalia, stationery and everything else-would make any difference. It was perfectly apparent at the time of the Northern Rock crisis that the Government were, as my noble friend said, at sixes and sevens, and that it was unclear who was in charge. The Treasury was forced to take control. I remember at the time that the governor's line was all about moral hazard, and we had great debates in this House about whether the governor was right to refuse the bid that was then made by Lloyds TSB to deal with Northern Rock. So, without going back over all that ground, it seems that the Minister is simply replicating a structure which failed and assuring us that by having some kind of formal structure it will be different. That is one point.
	My second point is that I am totally confused now about what the Minister said in response to the points made by the noble Lord, Lord Newby. Is he saying that no expenditure has been incurred and nothing has been done to pre-empt this legislation by the FSA or any other body-that nothing is being changed in anticipation of the Bill becoming law? If that is the case, can he state it clearly? I have not got the sharp eyes of my noble friend Lord Eccles, and I had not seen that clause. If not, is the Minister saying that this expenditure will be covered because there is a provision in the Bill which he hopes will be carried forward in the wash-up? We should know.
	Also-and I am sure that the noble Lord, Lord Newby, is correct-if there are people in the FSA who are being told their jobs are changing or may be at risk on the basis of the Bill getting on the statute book, that is called forward planning and I fear for the planning of the FSA. Can no one in the FSA see what the noble Lords, Lord Barnett and Lord Peston, see, that the Bill has no possibility of reaching the statute book as it exists? It would be very foolish indeed to make forward planning on the basis of what might happen to the Bill, and what might happen after 6 May.

Lord Myners: In response to the noble Lord, Lord Forsyth, throughout its life the tripartite arrangement involved regular meetings at deputy level. The number of meetings attended by principals may well have been two; the noble Lord advises me that that is the case and I have no reason to believe it is not. Perhaps it is not altogether surprising: it was during a period of extraordinary growth. The Governor of the Bank of England described it as the "nice" decade-non-inflationary consistent expansion. The deputies-that is the deputy governor, the chief executive and the Permanent Secretary to the Treasury; senior people leading their organisations-did meet very regularly. It would be wrong to suggest that the governor, the Chancellor and the chairman of the FSA did not meet regularly. Even last week I attended two meetings involving the governor, the Chancellor and the chairman of the FSA. They meet very regularly outside the formality of the old informal tripartite structure. We are now giving the structure much more formality. I hope there is not confusion there.
	In answer to the question from the noble Lord, Lord Newby, about expense being incurred, I think I am on solid ground in saying that no material expense has been incurred in anticipation of legislation being passed. It is of course necessary for these bodies to contemplate a piece of legislation that is going through Parliament, and to plan for what that legislation would mean. It is an entirely good thing to communicate to the people involved in consumer affairs in the FSA, for instance, that if this Bill is passed this is what will happen, and it would be atrocious not to respect people by sharing that with them. However, no commitments have been made, no legal agreements entered into, no new leases written, software commissioned or computer boxes acquired in anticipation of this legislation. I do not even think we have printed any special paper for the minutes of the CFS meetings. This is a very low-cost response to an enhanced superior product.

Lord Howard of Rising: If it is such a superior product and all these senior people had been meeting on such a regular basis for such a long time, how on earth is it suddenly going to work any better now?

Lord Myners: I think I detect a tactic at work here. Notwithstanding the fact that the Opposition Benches talk about the need to ensure proper parliamentary scrutiny, we will proceed very slowly if we have this number of amendments while Members of the Conservative Benches provide more opportunity for the noble Baroness to assemble her responses.
	The world experienced financial system structural failure. We have to learn the lessons, but we also have to ask how we can make the system work better. We published our reflections on the crisis and concluded that the structure that is embodied in the tripartite approach is fundamentally sound. Based on my experience of working for an organisation that was regulated by the FSA, of being on the board of one of the predecessor bodies of the FSA and of being a member of the Court of the Bank of England, the idea of giving the Bank of England responsibility for micro-regulation-as the noble Viscount, Lord Trenchard, would describe it-for 15,000 or so regulatory bodies, from the Tolpuddle building society or an independent financial adviser to the largest bank or insurance company, is a preposterous proposal. It is born out of the youthful enthusiasm of a shadow Chancellor of the Exchequer who has zero business experience. We need to get on with considering this legislation. I look forward to hearing the noble Baroness's response to my comments and those of the Committee on her amendments.

Baroness Noakes: The Minister rather spoilt it at the end. I was going to thank him for accepting Amendment 5, but I think I will bank it and not thank him. We have had a very interesting debate on Amendment 1. The noble Lord, Lord Barnett, who unfortunately is not in his place-

Lord Peston: There is a meeting of the Labour group and my noble friend Lord Barnett has a commitment to be there. As it happens, so have I, but I am desperate to hear what the noble Baroness, Lady Noakes, is about to say.

Baroness Noakes: That is an even more interesting piece of information. We can see where the priorities of the noble Lord, Lord Barnett, are. I am very glad that the noble Lord, Lord Peston, remains with us. The noble Lord, Lord Barnett, said that Parliament would be dissolved shortly after Easter. This is the first time that I have heard this from the Benches opposite. Perhaps the Minister will confirm whether Parliament will be dissolved immediately after Easter, as his noble friend Lord Barnett suggested. Can the Minister help on that?

Lord Myners: I think the noble Baroness is on the verge of abusing process. She fully understands that I have no idea when the election will be held, other than that it has to be held, I think, before 3 June. My right honourable friend the Prime Minister might conceivably like to go for the afternoon of 3 June for all I know.

Baroness Noakes: The reason is that there has been much talk in this Committee about the process of wash-up, but the plain fact is that we do not know when Parliament will be dissolved. We do not know for how many days we will be processing business. We, as the House of Lords, have to carry on as if the Bill will have the normal process of Committee, Report and Third Reading. That is what we seek to do. We cannot possibly work on any basis other than that a Bill that the Government choose to put before the House will be considered in the normal way. Noble Lords might want to anticipate both the timing of the election and the nature of the decisions that will be made by the parties in dealing with legislation that has not completed its passage before then, but it is not an appropriate topic for this Committee to debate. We have to take the Bill as we find it and scrutinise it in the way that we normally undertake our work.
	It is of course disturbing, as the noble Lord, Lord Newby, pointed out, that arrangements are apparently being made within the FSA as if the Bill will receive Royal Assent by 1 April. The Minister shakes his head, but I, too, have heard what the noble Lord, Lord Newby, appears to have heard about the preparations being made with a specific date in mind; it is more than a mere planning assumption. Indeed, they are incurring expenditure on recruiting somebody to head the new consumer financial education body. It has been clear for some time that this Bill could not receive Royal Assent by 1 April by any stretch of the imagination. So that clearly raises some questions which need to be answered, and I hope that at some point we will get proper answers.
	The real meat of what we have been talking about for the last hour and a half-

Lord Forsyth of Drumlean: I thought we had an absolutely clear undertaking from the Minister that no expenditure had been incurred at all. I thought we did get that undertaking.

Lord Myners: The language I used was "no material expenditure".

Baroness Noakes: Perhaps we will learn in due course what "material" actually means. It is one of those words that is capable of an infinity of meanings.
	The heart of our debate is about the new Council for Financial Stability and whether that has any meaning at all. I tabled my amendments to probe whether this new body would have any impact on the real world. Clearly, a body which simply comes together to monitor and to co-ordinate is no different to what happened before-no different to the tripartite authorities. The Minister said, in response to the question of my noble friend Lord Stewartby about how it would behave differently, that there would be transparency and minutes. That has nothing to do with behaving differently at all. If this body does not have any powers, if it is a non-executive body where people come together to talk-a "talking shop", as my noble friend Lord Hodgson said-this Bill will not make any difference.
	My noble friend Lord Higgins said that, if this is just the tripartite authorities, then it is not worthwhile. That, in effect, is the critique we have of this part of the Bill. There is no significant difference from what existed before, other than fancy new titles and some structure around minutes. There is no improvement being made in the arrangements within Government, the FSA and the Bank of England. I remind noble Lords that the tripartite arrangements did fail, and since there is nothing evident about how they will operate differently in the future, there is no reason to believe that those arrangements will do any better when they deal with issues at a later stage.

Lord Peston: Several noble Lords have made that kind of point. To my certain knowledge, not a single economist of any standing in the whole world predicted what happened in 2007. It is not in the least surprising, therefore, that the decision-makers in this country were somewhat taken aback. To the extent that they did not work optimally, it was not remotely because of the tripartite arrangements; it was to do with the fact that the event was a staggering event which, for the moment, some of us still do not fully understand. So I do not think the position of the noble Baroness has any logic or basis whatsoever.

Baroness Noakes: I am interested to hear what the noble Lord, Lord Peston, says because I know he believes that the answers to all questions must be given by economists.

Lord Peston: A major financial crisis falls within the field of economics rather than politics, to put it mildly.

Baroness Noakes: I say to the noble Lord, Lord Peston, that analyses were done by, for example, the Bank of England, on the way in which leverage was building up in the system. That went completely unnoticed, and I will be developing that point at a later stage.
	Some of the sources of what we had to cope with came from a shock from outside the UK, but the way that we dealt with it impacted hugely as a result of the way that arrangements had been set up by the current Prime Minister from 1997 onwards. That is the fundamental position of my party. My noble friends Lord Hodgson, Lord Stewartby, Lord Higgins, Lord Trenchard, Lord Forsyth, Lord Northbrook and Lord Howard approached this in much the same way. We cannot see what is in this new Council for Financial Stability. It does not appear to do anything to solve anything from the past. It does not represent an advance. It leaves many questions completely unanswered, as I said in my opening remarks.
	It is well known that these arrangements are not the policy of my party and we do not wish to see them. We will debate this later when we reach the end of Clause 1 in the way that we always do-we debate the content of the clause and then whether or not it should stand part of the Bill; so we will return to these issues later. For now, I shall not pursue this issue further.

Lord Stoddart of Swindon: Can the noble Baroness answer a question for me? We heard a lot about this phrase, "wash-up". I thought it was called "cleaning the dirty dishes"; "wash-up" is a phrase that I had not heard previously. Can she give me an assurance that her party will not embark on any dirty little deals with the Government and combine with them to thrust those deals through this House without proper debate?

Baroness Noakes: My Lords, I hope that my party would never do a deal, dirty or otherwise, with this Government. There is a process for agreeing outstanding legislation. That process ends with parliamentary approval-it cannot proceed without it. It is not the line-by-line approval that we are accustomed to carrying out in a Bill's scrutiny such as that which we are attempting today, but it is a parliamentary process. Beyond that, I have to say that wash-up is above my pay grade and I can answer no further questions on how wash-up will work for this Bill or, indeed, for any other.
	I was about to say that we will return to some of these issues in later amendments. I thank the Minister for agreeing to Amendment 5, which was not the most important in this group, but it is nevertheless nice to have a little agreement emerging from this Committee. I beg leave to withdraw the amendment.
	Amendment 1 withdrawn.
	Amendment 2
	 Moved by Lord Hamilton of Epsom
	2: Clause 1, page 1, line 12, at end insert-
	"( ) Within 6 months of this section coming into force, the Council must prepare the report referred to in section (Report on structure of UK financial system) and the Treasury must lay it before Parliament."

Lord Hamilton of Epsom: I shall speak also to Amendment 2 in my name in this group. First, I declare an interest as a director of an investment trust which is regulated by the FSA.
	The main point of these amendments is to discuss the whole question of being too big to fail. That means that I will address the question of Glass-Steagall, but I should like to take the debate rather wider than only talking about divorcing the clearing banks from their investment banks. I am sorry that I missed the Second Reading debate on 23 February when that topic was covered extensively, but I was abroad in the Far East.
	The amendments call for a report to be drawn up by the Council for Financial Stability. It is important to emphasise that. We are only asking for a report and are not saying that these things should be implemented. As this is an extremely controversial subject and opinions are very divided on what we should do about financial organisations that are too big to fail, a report is very necessary and I hope that, prior to the report, there will be opportunities for people with strong views on this to give evidence to the Council for Financial Stability and make their points.
	I am sorry that the noble Lord, Lord Desai, is no longer in his place because during the Second Reading he described himself as "a Hayekian libertarian", which just about describes where I come from. I am a pretty ardent capitalist. I do not really mind how much money people make and do not worry too much if they pay themselves bonuses. I start to break with that when the taxpayer has to pick up the tab when it all goes wrong. There is much bitterness at the moment about the way that the City is behaving. Bankers are unpopular people. The view of people in this country is that they gambled, made a wrong call and now the taxpayer is left to pick up the tab.
	This financial crisis has brought down many viable businesses. It has led to repossession of people's homes and unemployment, and created great personal distress. Many of those who have survived have done so by taking pay cuts and working shorter hours. These people see the bankers who have failed being bailed out. For them, life goes on. They still earn enormous sums and pay themselves vast bonuses as well. A good example of this is the recent result from Northern Rock. It has clocked up serious losses but they have not stopped the employees paying themselves bonuses. If you get bonuses when your company is losing money, how much bigger must the bonuses be when your company is making it? That does not add up for most people.
	What lessons have been learned from this? I think precious few, to judge from where the Government stand on all this. There is an extraordinary reluctance to look at bringing in the spirit of Glass-Steagall and separate those aspects of banking that involve taking significant risk from the more conventional form of banking that involves taking deposits and making loans. I know that things can never be that simple. Banks that lend mortgages and so forth often use financial instruments to offset their liabilities.
	What if we do not address this? To come back to a remark made in Second Reading by the noble Lord, Lord Desai, on 23 February, we have these cycles and there will be future financial crises. We must not think that this is the be-all and end-all of financial crises; there will be others. The normal evidence of financial crises is that each is worse than the last. When you come to assess the financial damage you can normally add another two noughts to the end. Surely we must entertain the idea that the separation and breaking up of large organisations may be a way forward. This needs study and we need to carefully weigh up the consequences of going down that road. I totally accept that we must ensure that the western world moves together on this. We cannot see London being asked to unilaterally take measures if this is not copied by other financial centres in the world, otherwise businesses will merely move from our city to places with more favourable regimes of taxation and regulation.
	Critics of Glass-Steagall always argue that it would have done nothing for Northern Rock or Lehman Brothers. That argument has to be right but I do not regard it as much more than a debating point. It has to be true: Northern Rock did not have an investment banking arm and Lehman Brothers did not have a retail bank. Even if Glass-Steagall had been operating at that point it would not have affected either of those spectacular bankruptcies. Yet let us be honest: Northern Rock had a completely indefensible and unsustainable business plan. It borrowed overnight money and leant it in 20-year mortgages, often lending more than the value of the property on which it was secured. As has been pointed out by my noble friend Lady Noakes, the tripartite system completely failed.
	Many months ago on a Question in this House, I asked the noble Lord, Lord Myners, what was happening to the bank supervisors. He assured me that all the people who used to carry out bank supervision in the Bank of England had been transferred to the FSA. Therefore, in a way, nothing had really changed: the people were still there and life carried on. However, we have to ask what they got up to, what they spent their time doing and what form of inspection they made of Northern Rock. Did they ask any serious questions about how sustainable this way of doing business was or did they all fall asleep? One wonders what on earth happened. There is no doubt that, if there had been early intervention in Northern Rock, its bankruptcy might well have been prevented. Therefore, some very serious questions need to be answered regarding why Northern Rock was allowed to carry on in the way that it did for quite as long as it did.
	Let us look at Lehman Brothers. Although the company was forced into liquidation, it is generally accepted that it was too big to fail. The collateral damage suffered as a result of Lehman Brothers going down was much too great. I think that if the United States Administration relived that time, they would bail out Lehman Brothers as well. However, if Lehman Brothers was too big to fail two or three years ago, how about Goldman Sachs today? Of course, as there is no Glass-Steagall in the United States as we speak, Goldman Sachs would currently be bailed out anyway because it has a retail banking side to the business and depositors would obviously have to be protected. However, I argue that, even if you separate the retail banking side from Goldman Sachs, you are still left with a financial organisation that is too big to fail. Everyone might say that the idea of Goldman Sachs going down is unthinkable, but then we suddenly hear that it was Goldman Sachs that bought all the Greek Eurobonds. So far as I can see, that seems to be pretty speculative business.
	Therefore, the rationale is that we have to break up organisations that are too big to fail and form them into smaller bits which are small enough to fail. If we do not do that, we will find ourselves back in this whole situation all over again. Contrary to the view of people who defend enormous organisations, very often smaller units produce greater returns to shareholders than large ones. I have no doubt that Goldman Sachs, which is a partnership, would make even more money if it operated as a number of smaller businesses rather than the very large one that it is today. It must be right to try to get our financial organisations into a position where they are small enough to fail so that we do not constantly have to look to the taxpayer to bail them out when things go wrong.
	If we do not want to destroy the capitalist system, we must change the structures to minimise the risk of taxpayers being called on to bail out businesses. The noble Lord, Lord Myners, has made himself a fortune as a freewheeling capitalist in the City of London. That capitalism, which has enriched the noble Lord, must be preserved because, if it goes through periodic bouts of nationalisation, it certainly will not survive. I beg to move.

Lord Newby: My Lords, I congratulate the noble Lord, Lord Hamilton of Epsom, on finding such an ingenious way of bringing to our debates today and into the purview of this Bill a subject which, slightly surprisingly in my view, dominated the Second Reading debate. Most of the features of the Bill were not debated at all at Second Reading. The question of banks being too big to fail and what you do about it was what most noble Lords spent most time discussing.
	The Committee will be aware that from the start we on these Benches have been grappling with that issue and have been very sympathetic to the concept of breaking up the banks or separating the utility functions and the more risky functions. Therefore, I was extremely pleased when a succession of noble Lords with a tremendous amount of experience in the City discussed both the in-principle arguments for breaking up the banks and the feasibility of doing so. When this issue is being debated, one of the main arguments of the noble Lord, Lord Myners, and the Government is that it cannot be done and that it is all too complicated because the banks are all integrated and you cannot split them without the whole system collapsing. When we discussed this at Second Reading, the argument was not about that but it was between the noble Lord, Lord Lawson, who argued that you had to split them formally, and the noble Lord, Lord Blackwell, who said that you could achieve the same principle by having two or more subsidiaries within the same holding company.
	It seems to us that all those issues are vital in determining the future of the banking system in this country. With the current Government, there is no appetite to discuss these issues. Therefore, it seems to us that to have in the Bill a requirement that these issues be revisited, given that they are actively being discussed virtually everywhere in the world, is an extremely good way of putting the matter back on the Government's agenda. Therefore, we support the amendment.

Lord Higgins: Even if some parts of the Bill are eventually washed in, rather than washed out, the possibility that this clause will appear on the statute book before the election is absolutely nil. Perhaps the Minister will let us know whether he disagrees with that view. If so, we can take an appropriate bet on the proceeds, in the spirit of general financial participation. Be that as it may.
	Although it may seem pointless debating this matter, given that it is not likely to reach the statute book, there is a case for debating the points raised by my noble friend in moving his amendment. I am among those who did not speak at Second Reading. I think we should put a limit on how many times a week one speaks in your Lordships' House. None the less, I am glad to have an opportunity to take up the points which my noble friend made with regard to Glass-Steagall and to the phrase "too big to fail". Of course, the two are related.
	In the Second Reading debate, my noble friend Lord Lawson set out all the arguments in favour of Glass-Steagall and he came down strongly in favour of some such replication in our system in the UK for the future. In reply, the Minister said that he was not persuaded by my noble friend Lord Lawson but that if he were to be persuaded by anyone, it would be my noble friend. The case put by my noble friend is very strong indeed on the question of dividing the less risky part of our banking system from the very risky part. These matters were put forward in a remarkable article by Mr Paul Volcker in the New York Times on 31 January and it is very important that people read it. He deals with the matter of being too big to fail. He says:
	"The phrase 'too big to fail' has entered into our everyday vocabulary. It carries the implication that really large, complex and highly interconnected financial institutions can count on public support at critical times. The sense of public outrage over seemingly unfair treatment is palpable. Beyond the emotion, the result is to provide those institutions with a competitive advantage in their financing, in their size and in their ability to take and absorb risks".
	He then comes up with some specific proposals about how the problem might be dealt with in regard to those banks which are thought to be too big to fail. Quite apart from the usual provisions and suggestions with regard to liquidity ratios and so on, he makes the point that perhaps one should have some form of a new resolution authority-he suggests it should be international, so it is relevant to today's debate-which would wind up in an orderly manner banks that were too big to fail. That is certainly worth considering in the international negotiations that are taking place.
	There are some important issues with which the next Government, of whatever party, will need to deal. But they are not dealt with at all in this Bill unless perhaps it is possible for the co-ordinating committee in some way to implement Glass-Stegall without relying on legislation. That does not seem very likely. These are far more important issues in many ways than the structure that we are considering with regard to regulation. It is helpful that my noble friend has raised these matters this afternoon.

Lord Hodgson of Astley Abbotts: I, too, am attracted by my noble friend's amendments, especially Amendment 11, as it would permit a degree of analysis to take place. It is said that distance lends enchantment; whether distance from the crisis that we have just had will lend enchantment is probably not likely, but it will probably lend perspective and maybe some clarity. Therefore, while Amendment 11 is attractive, Amendment 2, which requires it to happen in the next six months, is a little precipitant. Nevertheless the principle behind Amendment 11 holds good.
	I did not react to the Minister's comments about the crisis being over, but his officials might slip into his red box the leading article from today's Financial Times, as a number of things said in it are relevant to the debates that we had on both the first group and on this group of amendments. There are two relevant sentences in particular. First:
	"What the recovery really shows is the scale of the moral hazard problem the world still faces".
	That is the too big to fail issue that my noble friend raised. Secondly:
	"The second is a resolution regime that would allow losses to fall where they should without bringing down the system. This would prevent creditors from sheltering behind vital functions, such as the payments system, in a crisis and thus pushing losses onto the taxpayer".
	These are the thoughts that are emerging, and my noble friend's suggestion that we need an investigation and a report to reflect that seems entirely appropriate.
	It is not all at the macro level either. If the Minister leaves the grandeur of his Great George Street office, returns to the City and-I declared an interest on Second Reading-comes to me to try to find financing for small and medium-sized enterprises, he would say that the banks will say that there is money available for good propositions. I am sure that he says that in absolute good faith, but trying to find bank finance for such companies remains exceptionally difficult on two levels. First, the credit process has become immeasurably lengthy and complicated and the minefield though which small companies must travel is very complex. Sometimes when emerging from one minefield unhurt, another lies ahead, as further bells and whistles are put on to the requirements for permission. Along the way in this process, if it becomes clear that the company needs the money it causes huge alarms and excursions. The process is long, and in many cases small and medium-sized companies require a reasonably speedy resolution of their credit needs.
	So there are macro issues and micro issues which need to be considered. These could usefully be looked into and considered by a report of the sort that my noble friend has in mind. Certainly, if the Government, with or without wash-up or wash-out, are determined to proceed with this type of Bill, we need the facility to draw lessons from what has been going on. We are too close to the crisis now to be able to draw all those lessons. The sort of investigation and considered response that my noble friend has in mind under Amendment 11 seem to be entirely appropriate.

Lord Northbrook: My Lords, like my noble friend Lord Hodgson of Astley Abbots, I am more inclined to favour Amendment 11 rather than Amendment 2. I should like to draw the attention of the Committee to an interesting report prepared by the Congressional Research Service in 1987, which explored the cases for and against preserving the Glass-Steagall Act.
	The arguments for preserving Glass-Steagall, as written in 1987, are, first, that conflicts of interest characterise the granting of credit-lending-and the use of credit-investing-by the same entity, which led to the abuses that originally produced the Act. Secondly, depository institutions possess normal financial powers by virtue of their control of other people's money. Its extent must be limited to ensure soundness and competition in the market for funds-whether loans or investment. Thirdly, securities activities can be risky, leading to enormous losses, which could threaten the integrity of deposits. In turn, the US Government insure deposits and could be required to pay large sums if depository institutions were to collapse as a result of securities losses. Fourthly, depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities business. An example of that is the crash of real estate investment trusts sponsored by bank holding companies in the 1970s and 1980s.
	The Congressional Research Service report continued with the arguments against preserving the Act. It said that, first, depository institutions will now operate in deregulated financial markets in which distinctions between loans, securities and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated and to foreign financial institutions operating without much restriction from the Act. Secondly, conflicts of interest can be prevented by enforcing legislation against them and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.
	Thirdly, the securities activities that depository institutions are seeking are both low risk by their very nature and would reduce the total risk of organisations offering them, by diversification. Lastly, in much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learnt from their experience can be applied to our national financial structure and regulation.
	We have moved on 20 years since then. Sadly, I was abroad at Second Reading. I read the speech made by the noble Lord, Lord Lawson, very carefully. I also noted the Minister's comments. He said that he was not,
	"persuaded that the issue of size was fundamental to failure, nor that the combination of utility, retail, commercial and investment banking activities in one organisation is in itself a cause of weakness".
	He preferred,
	"the combination of much more capital behind the riskier activities, much more stringent liquidity requirements and better governance".-[Official Report, 23/2/10; col. 1002.]
	Twenty years later some circumstances have changed, so I look forward to reading a report which is applicable to the UK.

Lord Haskins: Whatever happens to this Bill, this subject will not go away after the election. We are slightly barking up the wrong tree when we talk about "too big to fail". It seems to me that we are talking about "too big to manage" and that the shareholders are the ones who have got to be in the first instance more active in looking at their now virtually worthless investments. They should be asking whether these large organisations are too big and too complicated to manage, and could dissolve themselves out of existence.
	There is a precedent for that. The conglomerates in the 1970s, 1980s and 1990s all grew in such a way that they became so complicated that eventually the late Lord Hanson had to keep buying businesses in order to stop the bicycle from falling over. When the bicycle eventually did fall over and he failed to buy ICI, everything had to be dissolved, and it was dissolved in quite an orderly way.
	In the Royal Bank of Scotland, Sir Fred Goodwin was showing signs of acting like Lord Hanson in that he had to keep buying to get bigger and bigger, and eventually the shareholders had to say enough is enough. That is happening now with the Royal Bank of Scotland, which is trying to get out of insurance and simplify itself. The route forward in the first instance must be for these large organisations to account to their shareholders for their activities, make them smaller and less complicated, and probably create shareholder value in the process.

Lord Stewartby: I wish to make the same point as the noble Lord about being too big to manage. It has become apparent in recent years that not only large conglomerates but many financial companies and banks that have gone global have not necessarily always faced up to the different cultures and regulatory requirements in other countries. They have become physically too big to manage, and this is a dangerous area.
	On the idea of splitting the banking system into two parts under some kind of revived Glass-Steagall, this issue will come to a head when regulatory authorities reach the stage where they will define and require higher capital to support racier activities. It is not an immediate issue but it will become critical. As the noble Lord, Lord Newby, mentioned, we discussed the practicalities of this at Second Reading. I was interested in what my noble friend Lord Blackwell said about having joint subsidiaries of a bank holding company, but I do not know whether that would give the security of separation that is needed in this situation. The issue of having a firewall between two separately managed businesses-which is basically what it would be-has not been addressed and I have yet to hear anyone make a convincing argument about how you could put a firewall between the two. This may come, but the timing of it will be influenced by the regulatory background and when the regulators reach the point where they have identified the levels of the capital backing needed in the separated part of the business which contains the more adventurous activities.

Lord Sanderson of Bowden: My Lords, having not spoken at Second Reading, I had not intended to intervene in the debate. However, I could not agree more with the noble Lord who said that it is all a question of management-that the management has to be good in any bank-and I speak from some experience as chairman of a smaller bank. It is quite clear that in the Royal Bank of Scotland, and in all other banks, the board has a definite responsibility for curbing the greed of people within the bank who want it to get bigger and bigger-and then it all fails. If a bank's board was doing its job properly, the management of the bank would be good. When it becomes poor, that is when the troubles we have seen, particularly in two Scottish banks, arise.

Lord Desai: My Lords, I apologise for not being in my place when the noble Lord, Lord Hamilton, moved the amendment. The problem is not that banks fail; it is that they have to be rescued. This Bill allows for a living will, so we will not have to rescue banks like we did in the past. The Glass-Steagall discussion is not relevant to the Bill. No matter how large or how small banks are, and no matter what they do, they will not be rescued; they will have to make a living will; and the whole question of Glass-Steagall does not arise.

Viscount Trenchard: My Lords, I, too, thank my noble friend Lord Hamilton for giving us the opportunity to debate this question, which the Bill hardly deals with; namely, whether we should require fundamental changes to the structure of our financial institutions. Having worked for 27 years for two British banks and for two years for a Japanese-owned bank, I have some experience of that. In my experience, where separate subsidiaries conducting different businesses were incorporated under one holding company, it was actually extremely difficult to co-operate with the other co-owned part of your group. If I was working for the investment banking part of Kleinwort Benson, for example, I could work much better with the asset management division of SG Warburg than with Kleinwort Benson's own asset management division. The separation of investment banking and commercial banking businesses can be achieved under common ownership.
	I agree that there must be much increased capital backing for the deposit-taking and retail business, and for the proprietary trading businesses which will take the margin out of it. I also welcome any opportunity to investigate whether structural changes are needed, which I have no doubt various institutions are doing all the time. However, I would hesitate to require any change in our structure in this country without securing agreement with other major countries with major financial markets. I worry that we anyway no longer have the power to do so as a result of the Government's having surrendered to the three new European super-regulators our ability to set regulatory policy. However, even if we had such authority, we would be very foolish to proceed in that direction without securing agreement at G20 level with the SEC, Japan, Singapore and Dubai as well as with our principal European partners.

Baroness Noakes: My Lords, I, too, congratulate my noble friend Lord Hamilton on bringing forward this amendment. As the noble Lord, Lord Newby, reminded us, we had an excellent debate at Second Reading in which the topic that lies behind the amendment featured prominently. My noble friend Lord Lawson, whom I am pleased to see in his place, made a very strong case for the Glass-Steagall kind of separation. My noble friend Lord Blackwell, who wanted to be here today to take part in this debate but unfortunately could not be, also made a contribution, which was referred to by my other noble friends.
	It is to state the obvious to say that it is not our party's policy to have the Council for Financial Stability. However, if we are going to look at the possibility in the context of the Bill, and if we have to have one, we might as well make sure that it does something useful, which is why my noble friend's suggestion of a report on the structure of the UK financial system is an excellent topic. Our debate in the past 30 minutes or so has shown that there is an appetite for such a report and such a public debate. As has been said, this topic will not go away.
	Last summer, when the Government issued their White Paper, Reforming Financial Markets, they set out a number of changes, many of which have found their way into the Bill. However, the White Paper had an element of complacency about it: it did not contain a critique of the structure of the UK financial system, and there was no reference to even considering structural changes to banks. Broadly, the Government's view seemed to be that they could go forward with more regulation, which would make everything all right.
	The topic has arisen in your Lordships' House on many occasions, often during Oral Questions. The Minister's response has generally been that structural change is not necessary because more capital and more regulation-and sometimes more governance, which today I think is coming out as more management-are capable of solving practically any problem in the banking system. The noble Lord, Lord Desai, gave us another one-that living wills are capable of solving practically any problem that can arise, which shows touching faith in that.
	My noble friend Lord Northbrook reminded us that this was-

Lord Desai: The only problem I want to solve is not to spend taxpayers' money rescuing banks run by incompetent managers.

Baroness Noakes: That is a very good problem to be solved. I just wonder whether it will be solved by living wills. Perhaps we will debate that when we get to one of the later clauses of the Bill. I was just saying that my noble friend Lord Northbrook reminded us that the Minister gave much the same answer in winding-up the Second Reading debate last month.
	My own party does not have a definitive view on the right way forward in terms of structure for the financial system. My honourable friend George Osborne has been clear that we will look at these issues and that we have an open mind on the structural separation of banking activities and proposals such as the Volcker rule, which my noble friend Lord Higgins put forward a few minutes ago. We are well aware that there are problems with any of these possibilities, and, of course, the banking industries will resist changes to their business model.
	I feel that doing nothing is probably not an option. The UK now has a particular concentration of banking which makes us particularly vulnerable to not being able to solve the too big to fail problem. In the UK three banks own 75 per cent of domestically-owned assets. It seems to me that we need to look beyond more regulation, more capital and more governance if we are to protect the UK from the impact of another bailout. I agree with my noble friend Lord Trenchard that we need to move in tandem with developments in other major countries. We have always said that that is what we would do if there were any changes. Going alone, however attractive that appears, could pose major risks to the health of our economy.
	All political parties like to talk about rebalancing the economy. Our economy has a huge dependence on financial services and rebalancing will not take effect overnight. It will take some time if we are to build up other parts of the economy. We must avoid damaging our financial services sector in the global marketplace. We have to remain competitive.
	The Treasury Select Committee in another place is at the moment carrying out an investigation into too big to fail. I am sure that its report will be extremely useful. However, there is no substitute for the Government working with their new creation, the Council for Financial Stability, to bring the collective wisdom of the Bank of England, the Treasury and the FSA to bear on this issue. I support my noble friend's amendment and I hope that the Minister will do so as well.

Lord Myners: My Lords, I am grateful to the noble Lord, Lord Hamilton, for his contribution in introducing a wide-ranging debate. I agree that vigilant monitoring, effective analysis and evaluation of all the risks to the financial stability of the United Kingdom is desirable; indeed it is essential. I include in this the risks inherent in the system itself. However, where I differ from the noble Lord is in the belief that a statutory and specific report should be required by this legislation.
	Under the current arrangements, the Bank of England twice a year produces its considered analysis of financial risk through its financial stability report. The FSA similarly produces a report on the financial risk outlook, with its well thought out appraisal of risk. Additionally, the annual report of the Council for Financial Stability, which we will debate later, provides a further vehicle for reviewing and reporting on the actions of the council and more widely on financial stability. The Council for Financial Stability will formally consider each of these reports, discuss the identified risks and agree the required actions in response. The formal and structured approach of the council can ensure that thorough analysis of financial stability is properly evaluated on an ongoing basis. As such, I do not believe that an additional one-off report is desirable or necessary. What matters more is the quality of regular and ongoing monitoring of risk and the effective co-ordination of actions to mitigate those challenges, challenges which could theoretically cause significant damage to the stability of the financial system.
	The noble Lord, Lord Hamilton of Epsom, described himself as a Hayekian liberal, as my noble friend Lord Desai had described himself. It is very encouraging to see a meeting of minds on that description-and in some respects I could also join that group, though not, perhaps, in a totally unqualified way. I thought that the noble Lord, Lord Hamilton, put his finger on one of the issues when he went on to talk about bankers paying themselves bonuses. I think that it is the paying themselves that is the issue. It is not the bonuses. The noble Lord mentioned Northern Rock. In parenthesis, I should say that the figures that Northern Rock announced today showed a very strong second half recovery to profitability. Mr Hoffman, who was recruited from Barclays to run Northern Rock, is doing a first class job in stabilising that business and had no part to play in its failure. However, it is the paying themselves bonuses that was the critical failure, at least in some of these processes. That is one of the reasons why we have placed so much reliance on strengthening governance and shareholder stewardship, including the new disclosure provisions which I announced today. The noble Lord, Lord Sanderson of Bowden, was right as well in saying that much of this also was a manifestation of greed.
	There has been much talk today about Glass-Steagall, which we discussed at some length on Second Reading. I again pay tribute to the noble Lord, Lord Lawson of Blaby, who produced a very thoughtful and considered speech. It was clear that a great deal of work had gone into the preparation of his speech and I think that we all benefited from listening to his views. Of course, Glass-Steagall is really rather different from what I think several noble Lords have in mind. Glass-Steagall was about separating the securities issuance and trading aspects of a business from banking. That was not at the core of the problem. The global financial system was brought to its knees not by the interface between securities activity and banking but by poor credit decisions-often within the context of a complex derivative-based structure-backed up by a funding structure that was not sustainable. There was nothing in Glass-Steagall per se-had it been in force-that would have avoided some of the outcomes which we saw with Lehman and Bear Stearns or, in this country, with Northern Rock, Bradford & Bingley and the Royal Bank of Scotland.
	So the too big to fail issue is actually a more critical one, and the language which is sometimes used about "casino banking" and "utility banking" gets us closer to the heart of where the intellectual debate lies here than referring back to Glass-Steagall. I do not think that the elements of Glass-Steagall are truly relevant to the issue that we are addressing. That has some bearing on the interesting contribution from the noble Lord, Lord Northbrook, who today cited a different source. We usually get Mr Michael Saunders of Citibank. He will be very annoyed that we have gone on for close to three hours without any reference to him at all, but no doubt that will come in the next batch of amendments.
	There is nothing in the Volcker rule that President Obama has announced that proposes Glass-Steagall, although Volcker's article in the New York Times, to which the noble Lord, Lord Higgins, refers, does talk to Glass-Steagall. I cited that article myself in the Second Reading debate as being a considered review of some of the issues. The Volcker rule, as President Obama described it, does not propose anything close to Glass-Steagall. In fact, there seems to be quite a lot of rapid moving backwards from the Volcker rule-in particular from Mr Osborne, who welcomed it at about 11 o'clock in the evening and decided at ten past seven the following morning that he had changed his mind. But more of that in a moment.

Lord Higgins: The Minister is of course right to distinguish between the article and the so-called Volcker rule, but I am not clear from his speech at Second Reading and this afternoon what his attitude is towards separating risky banking from less risky banking. That is, in essence, what we mean when we say Glass-Steagall. He turned it down but did not say why.

Lord Myners: If the noble Lord bears with me, I shall get to that point in a moment. I hope that I shall continue to evidence the consistency that the noble Baroness, Lady Noakes, observed in her comments on my views in these matters.
	I should say to the noble Lord, Lord Newby, that the separation was not something that I and the Government reject because we believe that it cannot be done. We believe that it can be done but do not believe that it is necessary that it should be done. We believe that the appropriate response, as the noble Baroness, Lady Noakes, reminded the Committee, is through much strengthened capital. In particular, there is now clear acknowledgment that Basel II, which was not even adopted by the Americans, encouraged banks to transfer risk on to their trading books and hold wholly inadequate capital against the risks. We are talking about much greater calibration of capital against risk, although I note-I come back to a point made by the noble Lord, Lord Sanderson-that no amount of capital will be sufficient for incompetent management not to be able to burn their way through it. Strengthened capital, proportionate to risk, is critical, as is much more balance sheet liquidity, which the FSA has taken the lead in promoting, as well as much more secure funding, which the Bank of England is now obliging our major banks to adopt. That, in turn, needs to be supported by enhanced governance, better quality management and superior shareholder or owner engagement. That speaks to the very significant points that the noble Lord, Lord Sanderson, made in his brief intervention.
	A number of these issues are not ones on which we can go it alone, to use the wording that the noble Baroness used. It is not that we could not choose to do some of these things on our own if we wanted to, but there are a number of issues on which it is better to have a globally co-ordinated process, so we do not disadvantage our fine institutions or place at risk the million or so jobs in the banking and financial sector.
	The noble Lord, Lord Hamilton, talked about Northern Rock and Lehmann Brothers. He introduced the concept of "too big to fail" and even gave some free advice to Goldman Sachs that it should break itself up into smaller firms and that it would then be even more profitable. I could not help notice the noble Lord, Lord Forsyth of Drumlean, pick up quite quickly on that point; no doubt Evercore, a firm with which he is associated, will now push this forward to Goldman Sachs as a way in which to enhance shareholder value-and I hope that he will pay a modest retainer to the noble Lord, Lord Hamilton, for bringing the idea to his attention.

Lord Forsyth of Drumlean: I thank the Minister for bringing the Committee's attention to my interests, but has not the relationship between Goldman Sachs and the Government historically been rather close?

Lord Myners: I do not think that it has been particularly close. The last time that Goldman Sachs gave any advice to the Government was before I was made a Minister, so it has not been an adviser to this Government for at least two years.

Lord Forsyth of Drumlean: I am sorry, but I thought that Goldman Sachs was the adviser that encouraged the Government to sell the gold at the bottom of the market.

Lord Myners: Oh, really? I knew that it could not possibly be a decision that the Chancellor took on his own, and I am indebted to the noble Lord, Lord Forsyth, for finally pinning down who we should blame.

Lord Hamilton of Epsom: May I just put the Minister right? I do not hold any view that Goldman Sachs would ever volunteer to break itself up. It would have to be broken up.

Lord Myners: I believe that what the noble Lord was saying was that it would actually be in its interests to do that, which is a novel way in which to look at the matter. I have to correct the noble Lord, Lord Hamilton, on the issue of Greece. It was not an issue of Goldman Sachs buying Greek bonds but selling credit default swaps and complex optional derivative contracts, which apparently made a contribution to helping Greece meet its indebtedness targets before joining the EU. Perhaps it is now buying Greek bonds; we will have to see.
	On the points made by the noble Lords, Lord Higgins and Lord Stewartby, as well as the issues raised by the noble Lord, Lord Blackwell, at Second Reading, we must ensure that banks can fail. I spoke on this matter at a Smith Institute lecture earlier this week. A system in which banks cannot fail is a poorly performing system that will produce sub-optimal outcomes, because the consequences of failure, salutary as they should be, will not be there, so the incentive effects to avoid failure will not be in place. That is the role of recovery and resolution plans, or living wills. They will address, together with other mechanisms, the issue that my noble friend Lord Desai raised of ensuring that the taxpayer never again has to step in and support failing banks or place capital at risk.
	Recovery and resolution plans are an area on which the UK leads and on which the FSA is already doing significant work with some of our leading banks. I was talking to the CEO of one of our largest banks last Friday about how they are progressing with preparing the recovery and resolution plan and was much encouraged by what I heard. The plans need to be complemented by some form of price to pay for the implicit support that the taxpayer ultimately provides against any possibility of bank failure. I suggested earlier this week that the banking industry through this implicit guarantee, which it has enjoyed for many decades and for which it has paid no premium, has actually enjoyed greater state aid than any industry in Britain, including the defence industry and agriculture, to which we normally refer when we talk about state support for industry. So the combination of recovery and resolution plans and some form of internationally agreed levy to cover the cost of failure is a necessary action to strengthen the system in future.
	I agree with the noble Lord, Lord Stewartby, and my noble friend Lord Haskins that it is not simply an issue of too big to fail but also too big to manage. I remember being seated at dinner with the chief executive of one of America's largest banks, in San Francisco in August 2008, before the crisis really hit. I spent an hour asking him what he did. It was quite clear to me in the end that, because of its size and complexity, it was not a business he was able to manage. Therefore, I should be very surprised if the Council for Financial Stability did not regularly address some of the issues of complexity, interconnectedness, size and management challenge which lie at the heart of the points that have been raised by noble Lords today.
	The noble Viscount, Lord Trenchard, referred to subsidiary structures within a group. My experience has been that it is sometimes easier to deal with another company's subsidiary than your own, although that had quite a lot to do with a deontology of separating conflicts of interest. In the future we will see much more use of subsidiarity rather than branch structures. That in itself will be within the necessary requirements of a viable resolution approach.
	Finally, in response to the noble Lord, Lord Hodgson of Astley Abbotts, I look forward with great interest to reading the Financial Times editorial today.

Lord Gilbert: Before my noble friend sits down at the end of his very interesting speech, I suggest that he draws the attention of the Council for Financial Stability to the operations of what are nominally called the Edge Acts in the United States, with which my noble friend may or may not be familiar. It is an amendment to the Federal Reserve named after Senator Edge of New Jersey, which specifically allowed joint-stock banks-commercial banks-to have up to two subsidiaries in different states so long as the one that accepted deposits did not make investments and the one that made investments did not accept deposits. It worked and as far as I know it is still working extremely well.

Lord Myners: That approach is part of the thinking that the world will move to in terms of international adoption of recovery and resolution plans. But you need to respect the firewalls between the different parts of the group. The firewall between Lehman Brothers and Lehman Brothers International Europe in London was not of two companies with separate capitalisation, separate management and a separate sense of who obligations lay to. There was a fungibility within the group which undoubtedly has contributed to some of the challenges in resolving both Lehman Brothers and Lehman Brothers International Europe.
	As I was saying to the noble Lord, Lord Hodgson of Astley Abbotts, in some ways the noble Lord is right. We are still too close to the crisis to see all the implications of what has happened. We have here an architecture for building a safer system built around the Council for Financial Stability. I do not know what to say in response to the noble Baroness, Lady Noakes, saying that the Conservative Party does not have a view on the structure of the banking system and the structure of banks. I can only assume that that is some euphemism to cover the various volte-faces that we have seen in past thinking. There are those on the Conservative Benches, including the noble Lord, Lord Lawson, who have no doubt about having a view on this. Perhaps Mr Osborne should take some time out to listen to the noble Lord, Lord Lawson, on these points.

Baroness Noakes: My Lords, I did not say that individual members of my party did not have a very clear view. I said that we did not have a definitive view for the party as a whole. We have an open mind, as I made absolutely clear. The Government do not have an open mind, which is why the Minister is resisting this amendment.

Lord Myners: The Government had an open mind in very carefully considering the implications. Let the Committee be in no doubt that we have spent a great deal of time considering the issues of size, interconnectivity, complexity and whether one organisation should include insurance, banking and securities. We have spent considerable time in reviewing the matter and we have reached our conclusions. However, for a party that is about to offer itself to the nation as being prepared for Government to say that its members have individual views but that it does not have a view as a party is absolutely extraordinary. However, looking at the faces of some the noble Baroness's supporters sitting behind her, my surprise is no greater than theirs. With that, I thank the noble Lord for stimulating this debate and discussion but I urge him to withdraw his amendment on the basis that the purpose that he seeks to achieve will be delivered by the model and the legislation as currently drafted.

Lord Hamilton of Epsom: I thank all noble Lords who have contributed to what has been an interesting debate. I do not accept the premise of the Minister that somehow this is all going to emerge from these constant reports that have been coming out of the Bank of England and the FSA and will come out of the new bodies in the future. I do not think that a regular monitoring of risk is a suitable way of addressing the question as to whether we have organisations that are too big to fail. Although everybody is frightfully keen on addressing this as if it is nothing to do with anything other than Glass-Steegall, it is not, as I hope I have indicated.
	All enormous organisations-I am sure the noble Lord, Lord Haskins, would support me on this-are very reluctant to break themselves up voluntarily. In terms of shareholder value, there are very often obvious benefits in big organisations breaking themselves up. They never do, however, because the people who run very large organisations enjoy running very large organisations. They do not want suddenly to find themselves running a much smaller organisation because they have split their business in half. Let us be absolutely clear. Goldman Sachs, or indeed any other large organisation, is not going voluntarily to split itself up into smaller bits. That is why somebody has got to do it for them.
	The Conservative Party is absolutely right to have an open mind on this whole question. If, at the end of the day, by some miracle, this report is instigated-I take all the worries that noble Lords have that we probably will not see this legalisation on the statute book-it would be obviously easier for my party to come to a clear decision as to what should happen. What we want is the facts and for the debate to go on, as my noble friend Lord Lawson has indicated. There are pros and cons on this issue. It is not altogether straightforward. I am the first to accept that. On the other hand, we have suffered desperately from organisations that are too big to fail and from big banks that have speculated with depositors' money. When they go down, the taxpayer has to move in to bail them out; otherwise an awful lot of ordinary people would lose money. I give way to the Minister.

Lord Myners: How small does the noble Lord think an organisation needs to be to fail? My experience was that even an organisation as small as the Dunfermline Building Society in the end became too big to fail because of its consequences. This is why we need to have all the steps that I have been articulating to make sure that individual organisations are safe and secure.

Lord Hamilton of Epsom: That is precisely the point of having a report that would look into all these issues. I do not know why we have to answer them all here now. It did not matter how big or small the Dunfermline Building Society was. It had a very amount number of depositors' money. Therefore, those people had to be bailed out by the taxpayer. There is, anyway, an undertaking from the taxpayer that he will actually bail out deposits-it used to be £35,000; I think we are up to £50,000. Automatically, they are going to move in on an organisation such as that.
	I totally accept the point made by my noble friend Lord Trenchard that there should be no question of us moving unilaterally on this. It would indeed be very dangerous and concerning if we were to do that. That is certainly not something that I advocate. I advocate that this issue be debated in a way that there is absolutely no chance that it will be debated under this new structure if it ever comes into being. All we have is a number of people sitting around making risk assessments. Will anybody grasp the nettle and say that what we should be talking about is organisations that are small enough to fail?
	I am grateful to everybody who has contributed to this debate. I should like to test the opinion of the Committee on this amendment.

Division on Amendment 2
	Contents 123; Not-Contents 113.
	Amendment 2 agreed.

Amendment 3
	 Moved by Lord Davies of Oldham
	3: Clause 1, page 2, line 1, leave out "may" and insert "must"

Lord Davies of Oldham: My Lords, I beg to move government Amendment 3 and, with the leave of the Committee, to speak to Amendment 4, which is grouped with it. Throughout the stages of this Bill in another place, the Government have been very clear that they intend to produce a statement under Clause 1(5). The Economic Secretary to the Treasury was clear about our intentions; the production of a full draft statement to enable proper scrutiny of the Bill also clearly indicated the Government's intention in that respect. However, seeing as we are continuing to debate this point, the Government are happy in addition to make it explicit in the Bill. Our amendment therefore makes it a requirement for the Treasury to lay a statement under Clause 1(5). However, we consider "must" preferable to "shall", as it is more consistent with the remainder of Clause 1, where "must" is used to connote an obligation. I beg to move.

Viscount Eccles: My Lords, it is always interesting when there is a conversion from the permissive to the mandatory-a move from some quiet, partial obligation to some Hegelian imperative. The interesting thing about this amendment is: what is the further provision that the Government have in mind in respect of this statement? It is a joint statement, because it cannot be made without consulting the other parties concerned. Going back to Clause 1(4)(a), there is an obligation to,
	"keep under review the impact (if any) on the stability of the UK financial system of events or circumstances outside the United Kingdom (as well as in the United Kingdom)".
	It seems extraordinary to me that those words are in that clause.
	The sub-prime market-in the derivatives of the same, which started in the United States-had some effect upon the stability of the United Kingdom. I hope, then, that this move to "must" means that we shall stop looking entirely inwards and start to remember that it might have been good to have had some idea about what was happening in Iceland before the crisis-and that it might now be good to have some idea about what is happening in China. Indeed, the Chinese are beginning to make considerable investments in the United Kingdom. No doubt, they can finance those without recourse to any British bank because they have a great pile of United States Treasury bills with which to pay.
	I feel strongly that the Bill-in this part, at least-has a certain irrelevance or out-of-date thinking in it. It is said by the Prime Minister that we live in a global economy, and that he thinks he is the first Prime Minister to have been in that office when the world became truly global. Yet the Bill, and this part of it, seems to indicate that we can draw a line around the UK financial system without regard to whether it is possible to do that. My contention would be that that is not possible.
	It is possible to see part of the financial system as an enabling mechanism for making our economy grow either at one pace or another. Indeed, that is the most important issue facing us in the near future; how fast will our economy grow? However, it is not possible to look at the UK financial system as though it was just ours, with no impact being provided by our system and our banks on the rest of the world or by other people's banks on what happens here. We deserve a much better explanation of why the Government have moved from a permissive to a Hegelian position by using "must".

Baroness Noakes: My Lords, the ingenuity of my noble friend Lord Eccles in raising so many issues in the context of a may/must amendment leaves me speechless. My Amendment 4 in this group is, as the Minister pointed out, the may/shall amendment. I had hoped that we would have one of those debates where the Minister would talk about the necessity of having flexibility and I would say how important it was to have certainty, but the Government have come along and trumped my amendment with their may/must amendment. I will of course accept that; it is a perfectly acceptable response to my amendment.

Lord Davies of Oldham: My Lords, I am grateful to both noble Lords who have spoken in this short debate, which I detect is somewhat shorter than those that we have had on the groups thus far. I particularly thank the noble Baroness for accepting the government amendment. I am grateful to the noble Viscount, Lord Eccles; while I have not been in the House for as long as him, this is the first sign that I have heard from the Conservative Benches of a venture into Hegelian philosophy. We might even at some stage move on to the derivative from Hegel, who learned so much from him; then I shall be listening to Conservative Back-Benchers commenting on Marxism. That day has not dawned yet, but if we wait long enough we may yet go into those realms of philosophy.
	I want to emphasise, realistically, that the noble Viscount sought to widen the debate when the issue is in fact narrow. It is about a requirement only to lay a statement, not the wider objectives of financial control. It is about making a statement on the process; therefore I hope that the noble Viscount will recognise that I understand his point. I was quite delighted when the noble Baroness suggested that I could have made a longer introduction to the government amendment, but its virtue stands in its brevity and, as she knows, I am a Lord of few words. Therefore I am grateful for her agreement.
	Amendment 3 agreed.
	Amendment 4 not moved.
	Amendment 5
	 Moved by Baroness Noakes
	5: Clause 1, page 2, line 8, after "Council," insert-
	"( ) specify the responsibilities of each relevant authority in protecting or enhancing the stability of the UK financial system,"
	Amendment 5 agreed.
	Amendment 6
	 Moved by Baroness Noakes
	6: Clause 1, page 2, line 8, after "Council," insert-
	"( ) specify the powers each relevant authority is able to exercise in protecting or enhancing the stability of the system,"

Baroness Noakes: My Lords, I shall move Amendment 6 and speak to Amendment 27, which is in this group. These amendments concern the financial stability powers of the FSA, the Bank of England and the Treasury. In the first group of amendments this afternoon, which seems rather a long time ago now, I focused on the responsibilities of the tripartite authorities. These amendments are the flipside of that, namely the powers that can be used to fulfil those responsibilities. Amendment 6 adds a further item which the statement issued by the Treasury under Clause 1(5) should cover, namely the powers of the relevant authorities to protect or enhance financial stability. Since my very similar Amendment 5 found favour with the Government this afternoon, I have some hope that Amendment 6 will, perhaps, similarly find favour. It is fair to say that requiring the statement to set out the powers is not an onerous requirement.
	The current draft of the statement says what the objectives and responsibilities of the three parties are. It goes on to talk about the discussion and co-ordination functions we debated earlier, but it does not say how one gets from discussion and co-ordination to action-that has to be by way of the powers of the individual bodies. The Government's position is that the council itself should not have any powers-that was established during our earlier debates-but that makes it all the more important that the powers exist to deliver financial stability and to establish who holds them. Ignoring the powers, as the draft statement currently does, leaves questions dangling in the air about whether there are indeed sufficient powers to deliver financial stability.
	That leads me to the second amendment in this group, Amendment 27, which requires the Treasury to prepare a report on the powers needed by the tripartite authorities to fulfil their financial stability responsibilities. If the existing powers are found to be insufficient, my amendment says that the report should identify that and set out recommendations for remedying them. Proposed new subsection (3) gives the Treasury one year to deliver this report.
	The Banking Act which we processed last year gave the Bank and the Treasury a suite of powers which could be used to deal with a threat to financial stability from a bank which was in financial difficulties. Those powers are necessary, but they are not sufficient to deliver financial stability. The Act also gave the Bank of England an explicit financial stability objective, but did not add any further tools or powers. The Governor of the Bank of England was quoted by the Treasury Select Committee in another place last year as saying that,
	"it is not entirely clear how the Bank will be able to discharge its new statutory responsibility if we can do no more than issue sermons".
	There is nothing in the Bill which gives the Bank an ability to do more than issue sermons.
	In the evidence sessions to the Public Bill Committee in another place, the Bank of England's representative said,
	"we are still at the stage of thinking about the kinds of tools that would be used".-[Official Report, Commons, Financial Services Bill Committee, 8/12/09; col. 30.]
	In other words, this Bill does not settle the question of what tools are needed. The Bank of England's discussion paper of last November and its financial stability review earlier this year outlined its thinking on the macro-prudential tools needed for financial stability. The Bill does not progress that. The Bank and the governor have been clear that they do not see their monetary policy responsibility as extending to asset prices and asset bubbles.
	My honourable friend George Osborne demonstrated in his recent Mais lecture that financial crises are always linked to a major increase in debt, one of the consequences of which is often rapidly rising asset prices. There is a pressing need to identify what tools will be used when debt and asset prices rise to alarming levels. The Bill does not deal with that. At a more mundane level, the Bank of England representative made it clear in his evidence to the Public Bill Committee that the Bank lacks an information power to underpin its role in the special resolution regime. The Bill does not give the Bank that power-though I have to say to the Minister that I have an amendment much later on the Marshalled List which seeks to create one.
	At Second Reading, the noble Lord, Lord Eatwell, referred to the need for a radical agenda which included pro-cyclical provisions and leverage collars. He noted that the Bill does not set out powers and responsibilities for putting this sort of agenda into action. There is not even a whisper of them in the Bill.
	Amendment 27 does not seek to provide any answer to the question of what powers are necessary to underpin financial stability, or who should exercise them. It does however give the Treasury responsibility for pulling together the various strands of work, identifying what powers are needed and recommending what should happen if they do not already exist or are held by the wrong people. It allows one year for the task. There has been a prodigious amount of work done in this country and under the auspices of the G20. This talking shop has to result in some action, and importantly Parliament must be involved in the decisions, which is why my amendment allows for the laying of the report before Parliament.
	The noble Lord, Lord Eatwell, was firmly of the view at Second Reading that in the UK we do not need to await full global agreement before pressing ahead. I broadly support that position, with the caveat that while the UK can front-run on issues-and given the size and importance of our financial services industry it would be natural to do so-we must not allow ourselves to end up out of step competitively with the rest of the world.
	I must also mention Europe, which my noble friend Lord Trenchard has mentioned this afternoon. This may be the source of problems-more than usual for Europe. The Government have been devising their policy for financial stability while our neighbours in Europe have also been moving with unaccustomed speed to set up a new European supervisory architecture which is trying to accumulate as many powers as possible to trump national powers. The Minister will be aware that every time the Council of Ministers determines what national protections should exist, the Commission and the Parliament pull in the other direction. We want the UK Government to be able to chart the UK's own course, and to frame financial stability measures and powers in a UK context, while also achieving convergence with global standards. Will the Minister say how the Government see developments in Europe? Will we in the UK be setting the agenda for ourselves next year, or will it be laid down for us by the new European Systemic Risk Board and the European supervisory authorities? If that is the case, what influence will the UK have given that qualified majority voting is involved? Once Europe has had its say, what, if any, scope will there be for national action? Put another way, is my amendment on powers completely unnecessary because Europe will be dictating the answer? I beg to move.

Lord Howard of Rising: I support the amendments tabled by my noble friend Lady Noakes. It is difficult to see how anyone can argue with defining responsibilities. It is also difficult to see that anyone can object to giving sufficient power to do the job; having looked at what needs to be done, it is only reasonable to allow those who have to take the action to have reasonable tools with which to do it. My noble friend set out far more cogently and eloquently than I possibly could the benefits of her amendments, and I hope the Minister will give due attention to what she has said. I have no doubt that if he does, he will probably make some concessions.

Viscount Trenchard: I also support the amendments tabled by my noble friend Lady Noakes. It is clear that if the Government give an exactly identical responsibility or objective to each of the three tripartite bodies without saying which shall be subordinated to which, or giving the ultimate power to supervise financial institutions back to the Bank of England as we advocate on these Benches, further clarification of the respective powers of each institution and of possible additional powers that may be needed becomes very necessary.
	Earlier in the debate, the Minister, who is not in his place, criticised me for saying that macro-prudential regulation should be carried out separately from micro-prudential regulation. I did not mean to suggest that the same people who supervise the smallest building society should carry out macro-prudential supervision, or the "big picture" stuff. However, if you are responsible for the big picture, which we have come to call "macro-prudential supervision", you must also have the ability to supervise the major players in the financial markets. Macro-prudential and micro-prudential supervision are part of the same supervisory function. I did not mean to say that the same people should do it; obviously they cannot. However, prudential supervision should ultimately be the responsibility of the Bank of England. Therefore, the FSA-in whatever form it may continue-should either be a part of the Bank of England or report to it so that the governor has the ultimate power to supervise those major financial institutions which are major players in financial markets.
	My noble friend Lady Noakes also touched on the question that I referred to earlier. My understanding, from the chief executive of the FSA shortly before he resigned, is that it is no longer possible for the United Kingdom to set regulatory policy, and that we have already surrendered to the three new regulatory bodies and are right to do that. This is quite extraordinary, considering the role that our financial markets play in global financial markets as a whole. We have the leading international financial centre here. The Minister also commented that having a single regulator was the right thing to do, and that we were right to have put the previous nine financial regulators together in one. I agree with him, but why are we going to subordinate our regulatory system to the new European regulatory architecture, which has three bodies-that is, separate bodies for banking, securities and insurance and pensions? If you read this Bill you would have no idea about the European regulatory framework against which it is being formulated.

Lord Newby: My Lords, I was not going to speak to this amendment but I must congratulate the noble Baroness on showing extraordinary self-control this evening. It has taken until Amendment 6 for her to be able to have a go at the EU. That is probably a record.
	I have a couple of questions for the Conservatives about the European regulatory bodies. Are they saying that they do not think there should be any? Is the noble Viscount, Lord Trenchard, saying that he would prefer one to three?

Viscount Trenchard: I thank the noble Lord, Lord Newby, for asking me that question. Financial regulation should be harmonised and co-ordinated on a global level, not a European level. Financial markets are definitely global. They are not national and they are not European. Within the European Union there is only one major wholesale financial market and that is London. Of course, every country has its own retail market, so every country needs its own body to supervise its retail financial market. As far as wholesale financial markets are concerned, London is the only market. London is also the principal global financial market, or one of them. Our regulator, be it the Bank of England or the FSA, should be able to sit at the table with the American SEC, Japan's FSA and other principal financial regulators around the world to co-ordinate regulatory policy. To attempt to do so at a European level is unnecessary and potentially destructive to London's competitiveness.

Lord Northbrook: I support my noble friend Lady Noakes's Amendments 6 and 27. They cover two different but important areas. Amendment 6 specifies the powers that each relevant authority is able to exercise in protecting or enhancing the stability of the system. Amendment 27 identifies additional powers needed to field responsibility for financial stability. These amendments seem entirely necessary. As it stands, the Bill is far too vague on these matters.
	I also support my noble friend Lord Trenchard in his worries about the powers of the European regulators making much of this legislation redundant. I also support his views on our being more in cahoots with the SEC and Far East regulators, with Europe being part of the system.

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have spoken to this group of amendments. I will deal them out of sequence, starting with Amendment 27. I will ask the noble Baroness not to press that amendment but I will be more constructive about Amendment 6. Therefore, she may think this an acceptable package taken in the round.
	On Amendment 27, we do not believe that there are gaps in the responsibilities and powers of the authorities to deal with financial stability. We looked at this very carefully when we produced Reforming Financial Markets. We concluded that, beyond the sensible measures in the Bill, no further powers or responsibilities were necessary. We do not believe that there is a gap, but if the work of the council proved that there were problems, the Government would of course act. However, to ask for a specific report to be produced appears somewhat bureaucratic and unnecessary.
	As I have indicated, I see more merit in Amendment 6. There was obviously extensive discussion in another place on these issues, which has been partly reflected in the contributions here this evening about who does what with regard to financial stability. We share the view that there is merit in setting out the roles and responsibilities of the authorities, which we are being enjoined to do. The draft of the statement provided for by Clause 1(5)-the council's terms of reference-is available on the Treasury website. It provides an overview of the authority's financial stability responsibilities. This is intended to put the detail of the council's objectives and procedures into context.
	The statement also sets out that the authorities intend to revise the Memorandum of Understanding between them. As previously mentioned, the memorandum between the Bank of England, the FSA and the Treasury was first agreed in 1997 and updated in 2006. It sets out the roles of each authority and how they work together to pursue financial stability. We made clear in another place that, as suggested in the draft terms of reference, the Memorandum of Understanding would be updated with consolidated detail of each authority's roles for financial stability.
	We thought that that was a convincing position to take. In the other place, reservations were entered about this. These have been reflected in the speeches of the noble Baroness and others in Committee today. Clearly, we have not convinced the House on this point. There is still a desire for the detail of roles and responsibilities to be included in the terms of reference. In light of those representations and their force, we are willing to accept Amendment 6 and we will include the necessary detail in the statement produced under Clause 1(5). I hope, therefore, that the noble Baroness will feel that she has persuaded the Government of the merits of her first amendment, and will perhaps be indulgent enough not to press Amendment 27.

Baroness Noakes: My Lords, I did not know that there was a "one each" principle on amendments; I thought we could have as many as we liked. Perhaps I still have something to learn about the procedures of your Lordships' House.
	I say to the noble Lord, Lord Newby, that my noble friend Lord Trenchard explained our position on Europe. We believe that the most appropriate forums are the international ones, under the G20. We are very concerned about the powers being taken by Europe, which will fundamentally affect the financial services industry in the UK much more than anywhere else. If anyone wants to see how dreadful European involvement in financial regulation is, they only have to look at the alternative investment fund management directive. It shows a lack of understanding of the subject matter and can be extremely harmful to the UK. We sign up to European involvement only to the extent that it does not prohibit our developing proper solutions via the G20, and does not tie our hands unnecessarily in respect of British interests, which are different.
	I thank my noble friends Lord Howard, Lord Trenchard and Lord Northbrook, all of whom were very supportive. I obviously thank the noble Lord, Lord Davies, for agreeing to Amendment 6; that is most gratifying and I thank him for it. However, I was disappointed that the Minister said that having a report would be bureaucratic and unnecessary. The point is not that it would be bureaucratic for the Treasury-the Treasury may well regard it as yet another task that it has to do, and therefore as bureaucratic-but that the report was to be laid before Parliament. Parliament's involvement in the development of financial stability has been seriously lacking. It is lacking in this Bill, and it has been lacking in many other developments-such as when we have occasionally had a Statement to the House or seen a White Paper at the same time as everyone else. The Government do not take Parliament very seriously in these issues. They like to go into their tripartite authority arrangements and chatter among themselves, but not involve Parliament.
	On this principle of "you have one and I have one", which I am prepared to sign up to until the dinner break, I shall not move Amendment 27. However, I should like to formally move Amendment 6.
	Amendment 6 agreed.
	Amendment 7 not moved.
	Amendment 8
	 Moved by Baroness Noakes
	8: Clause 1, page 2, line 11, at end insert "and if the statement has not been revised for a period of two years or longer, the Treasury shall consult on whether or not it should be revised"

Baroness Noakes: My Lords, Amendment 8 amends Clause 1(7). As we have discussed in our debates today, Clause 1 allows the Treasury to prepare a statement about the functions of the Council for Financial Stability. Under subsection (7), the Treasury must keep the statement under review. My Amendment 8 says that if the statement has not been revised for two years, the Treasury must consult on whether it should be revised.
	This amendment was suggested to us by the Law Society of Scotland and seems to make perfect sense. It would be easy for a statement to lie neglected in the files somewhere in the Treasury, and for it to become out of date. Where is the stimulus for the Treasury to keep it up to date? There is a parallel in the commercial world, where it is normal practice for committees-such as remuneration committees or audit committees-to formally review their terms of reference once a year, because if they do not do so, they get out of touch with the things that should be in there.
	I am reminded that the memorandum of understanding between the Bank of England, the Treasury and the FSA was first published in October 1997, when the Bank of England Act was first published as a Bill, and long before the FSA took legal form as a result of the Financial Services and Markets Act 2000. As the noble Lord, Lord Myners, told us, that memorandum of understanding was not updated until March 2006, eight and a half years later. In between was a period during which the landscape of the financial services sector changed very considerably. So it is very easy for these sorts of documents-terms of reference and memoranda of understanding-to get stale and to fail to be reviewed.
	I do not know whether more frequent revisions to the memorandum of understanding would have changed the course of events that exposed the tripartite arrangements as weak and fundamentally flawed. The tripartite authorities hardly ever met at principal level before then, so it may well be the case that a memorandum of understanding in revised form would have had no impact whatever. The tripartite arrangements did fail, and were probably doomed to fail, because of the way they were operated and not the way they were written down.
	Going forward, we clearly have to have some in-built mechanism for the new statement to be reviewed, and simply giving the Treasury the responsibility to keep it under review does not go far enough. My amendment is a modest one, ensuring that the Treasury look at it formally every two years. I cannot think that the Government would oppose something as reasonable as this amendment, and I beg to move.

Lord Davies of Oldham: My Lords, the noble Baroness referred to the extent to which the memorandum of understanding was revised in 2006, having been introduced in 1997. She also says that she cannot derive from that any particular lessons of weakness with regard to the position. The simple fact is that the Government do not expect the statement to require updating on a regular basis. However, the Bill as drafted is quite clear that it is the duty of the Treasury to keep the statement under review, and that is exactly what the Government intend to do. It is important that the terms of reference are fit for purpose in undertaking this requirement for ongoing review, and the Government of course will remain open to any concerns raised over the scope of the council's terms of reference by the FSA or the Bank of England or even more widely-perhaps points raised in a parliamentary debate on the council's annual report. However, a formal requirement to consult every two years on whether to revise the terms of reference does seem excessive. We believe that it is more sensible for any review of the statement to be driven by evidence of need and not by an arbitrary, statutory trigger.
	Of course I agree with the noble Baroness that the statement needs to be kept under review, but the amendment insists on a formal requirement to operate the full consultation procedure every two years. The Government are not convinced of that case, and I hope the noble Baroness will withdraw her amendment.

Baroness Noakes: My Lords, it is a real disappointment that the Government cannot bring themselves to agree to such a modest amendment. I might be inclined to test the opinion of the Committee-but I think that on this particular occasion, I shall not. I will let the Government off the hook and think about it. If we have a Report stage, I will think about bringing this back. For the time being, I beg leave to withdraw the amendment.
	Amendment 8 withdrawn.
	Amendment 9
	 Moved by Baroness Noakes
	9: Clause 1, page 2, line 14, at end insert ", and
	( ) such other persons who the Treasury consider to have an interest in the statement"

Baroness Noakes: My Lords, I shall speak also to Amendment 10 in this group. Both amendments concern a consultation on the statement of the Council for Financial Stability's functions required by Clause 1(5). Amendment 9 was also suggested to us by the Law Society of Scotland. Under subsection (8), the Treasury is required to consult, and the Minister has referred to that. However, the consultation extends only to the FSA and the Bank of England. My amendment widens the consultees to include,
	"other persons who the Treasury consider to have an interest in the statement".
	There is a certain inwardness about the Council for Financial Stability: its three members are the top men in the Treasury, the FSA and the Bank of England; and the things that the council has to consider are reports written by the three bodies, as set out in Clause 2. A statement about the council's functions is to be prepared by the Treasury in consultation only with the other two.
	The matters referred to in subsection (6) as candidates for inclusion in the published statement in fact fall into two categories. Paragraphs (c) and (d) of subsection (6) deal with the council's procedures and things that would facilitate the exercise of its functions. I do not think that anyone outside the threesome would have an interest in that. However, paragraph (a) allows the Treasury to specify particular objectives for the council to meet, and paragraph (b) deals with specific matters to which the council must have regard in exercising its functions.
	On the assumption that the council will in practice do a bit more than the monitoring and co-ordinating that the draft statement refers to, I can think of a lot of people who would have an interest in how those issues would be dealt with in the statement. Many people and firms have direct and indirect interests in how the actions that could result from the deliberations of the council would impact on them. The statement would benefit from scrutiny by people other than the inner circle of the Treasury, the FSA and the Bank of England.
	Amendment 10 is also eminently reasonable, with transparency in mind. Earlier, the noble Lord, Lord Myners, told us a lot about how these new arrangements would be transparent. My amendment requires the Treasury to publish responses to its consultation under subsection (8). The Minister will be aware that it is good practice to publish consultation responses, although I am sure that he is also aware that the degree of enthusiasm with which the Government embrace that tends to vary with the degree of support shown for the Government's line.
	Amendment 10 would be valid regardless of whether the Government accepted my Amendment 9. Even if only the Treasury and the FSA were consulted, their responses would be of interest to the outside world; but if Amendment 9 were accepted, it would be even more important that the Treasury published the views expressed. It is normal for the Government to set out their response to consultation responses, and that is often interesting in its own right and can of course trigger parliamentary involvement, more usually through a Select Committee in another place.
	I hope the Minister will agree that consultation on a wider basis and transparency about consultation are virtues to be pursued and that he will agree with these amendments. I beg to move.

Lord Hamilton of Epsom: I support my noble friend on her two amendments, but I must confess that I support her with rather more enthusiasm on Amendment 10 than on Amendment 9. It must be absolutely right to make sure that any consultation that takes place is published, because we all believe in transparency and openness. It must be right that people can access deliberations which have taken place and can take a view on what is going on. What worries me about Amendment 9 is its provision for the Treasury to consider which other persons have an interest in the statement. I get the impression that that leaves the Treasury with a veto. It may not ask any extra persons to become involved in the consultation.
	I do not know why, but I have suspicions that it might be rather attractive to the Treasury to ensure that a minimal number of people are asked. If the decision is to lie with it, perhaps no one else will be asked to take part in the consultation, because that will be what the Treasury decided. I am not an overenthusiastic supporter of the amendment, but perhaps my noble friend Lady Noakes can spell out for us how she sees it working. Or does she have much greater faith in the good will of the Treasury towards everyone than perhaps I do?

Lord Davies of Oldham: My Lords, the noble Lord, Lord Hamilton, has expressed some doubt about Amendment 9, but only a small amount of the doubt that the Government have about it. The amendment considers who the Treasury formally consults when revising the statement. The Bill requires the Treasury to consider the other organisations that provide members of the council-namely the Bank of England and the FSA. What is being suggested here is that there should be much wider consultation, even approaching a full public consultation, on the matter. We do not consider that either necessary or appropriate.
	I emphasise that the council's terms of reference are about how the three authorities work effectively together in tackling financial stability. We agree that the high-level objectives of the council are a matter of clear public interest-hence their inclusion in Clause 1(3). It is obvious that those high-level objectives are part of public concern and should be for public debate, but we do not consider that the details of how the council goes about its work to deliver these overarching objectives is a matter for wider public consultation. That is why I hope that the noble Baroness will withdraw Amendment 9.
	There was greater agreement between the noble Baroness and the noble Lord, Lord Hamilton, on Amendment 10. However, that requires responses to consultation to be published. As I indicated, we do not think that that public consultation is appropriate in any case. Therefore, for obvious reasons, we do not think that the issue of the publication of a consultation which ought not to take place should be in the Bill.
	The Government's position is clear. We have real reservations about Amendment 9. From those reservations, it follows logically that we could not possibly accept Amendment 10.

Lord Hamilton of Epsom: I should make my position clear. I do not think that my noble friend's amendment goes far enough, because it leaves the Treasury with a veto on who is asked to get involved in this consultation. I do not accept that a complete repository of wisdom is held on all these matters by the FSA and the Bank of England. People such as the noble Lord, Lord Desai, may well have something to contribute to the whole question of financial stability and he should have the opportunity to make his views known. It is a mistake merely to restrict the consultation to this small number of people. The reason why I do not think that my noble friend's amendment has gone far enough is that the Treasury would be under no compulsion to ask anyone else to be involved in the consultation, and I think that they should be.

Lord Davies of Oldham: I am grateful to the noble Lord for clarifying his position. Perhaps I should not have prayed him in aid in relation to the Government's position, and I withdraw my remarks that might have given that indication. However, he will fully accept the burden of the Government's position. Of course we regard the high-level objectives as a matter of considerable public concern, and they should be open to full debate. However, we are talking about the mechanics and the process of the three parties, and we are against the concept of those being put out to wider consultation. Therefore, by definition, if we are against the principle of Amendment 9, we are obviously against Amendment 10. I hope the noble Baroness will withdraw the amendment and not move Amendment 10.

Baroness Noakes: I do not quite know what to do with my amendments. On a slightly different point, the Minister said that the Government did not have to regard Amendment 10 as relevant because they did not agree with Amendment 9, which is about public consultation. There was no public consultation so there was nothing to publish. I made the point when I introduced my amendments that Amendment 10 would exist independently of Amendment 9 because there is already a consultation provided for in the Bill. There would be responses to the Treasury on this consultation. I suggest that those at least should be made plain and transparent. If the Government are serious about transparency in these new arrangements, why do they go to the trouble of setting out that there is a process and then get secretive about the outcome? Why is the minimalist consultation required in the Bill not to be transparent?

Lord Davies of Oldham: The Government are not being secretive about the issue. On the issue of principle-the objectives before the council-of course we are talking about the widest consultation. There is no question but that those are part of public debate. The issue dealt with in the amendments relates to the actual operation between the three authorities. It is the consultation on those issues to which the Government object. The noble Baroness pushed me further, to examine the position if the deliberations between the three authorities were open and should be discussed. Even if we did accept that, the results of the consultation processes should not be open for publication. We are concerned here with the three authorities, having had the benefit of the consultation, working out their relationships to reach the publicly declared broad objectives. The mechanics by which they discuss these matters do not seem appropriate for publication. Indeed, from the position that the Government adopt that the consultation should not take place, it follows logically that we are not in favour of publication.

Lord Northbrook: Does the noble Lord not feel that public confidence might be increased by publication?

Lord Davies of Oldham: The public are of course concerned about the objectives. That is bound to be the case with the important work of the council but process is a different matter. The case has not been made out that the public have a great interest in the process by which the council concludes its deliberations and how it has acted in those terms, or that it would advance the cause of intelligent decision-making if that was part of the Bill. That is why I object to the two amendments.

Baroness Noakes: I thank my noble friend Lord Hamilton for his support this evening and am sorry if I disappointed him by being too timid with my amendment. I will try harder later on.
	The Minister has not adequately explained why the Bill says there must be some form of consultation-we say there should be more-but that that consultation is not to be revealed to the public. It seems that most of this Bill is just window-dressing. Things are put in to make it look as if there is some transparency and a council with processes that the public are supposed to admire. There is no substance whatever behind these clauses. It is just puff. The Minister has shown that in his response, putting in subsection (8) that there must be some consultation and then saying that the three authorities will work out their relationships themselves. If they just need to work out their relationships themselves, what on earth is the point of subsection (8)?
	I shall not press this case now. If we ever take this Bill on to later stages I shall certainly return to it. For now I beg leave to withdraw the amendment.
	Amendment 9 withdrawn.
	Amendment 10 not moved.
	House resumed. Committee to begin again not before 8.35 pm.

Royal Parks and Other Open Spaces (Amendment) etc. Regulations 2010
	 — 
	Motion to Resolve

Moved By Baroness Tonge
	That the draft regulations, laid before the House on 1 February, be not made.

Baroness Tonge: My Lords, the Royal Parks comprise over 5,000 acres of historic parkland in and around London. I shall confine my remarks to Richmond Park in the main, but other noble Lords will no doubt talk about Bushy Park. Both parks lie in the London Borough of Richmond but are a pleasure for people in Richmond, Twickenham, Putney and Kingston. Both are of great concern to MPs in the House of Commons, most notably Susan Kramer and Vince Cable. The London Borough of Richmond upon Thames has always had as its motto:
	"Where the countryside comes to town".
	Richmond Park and Bushy Park are our lungs and our countryside. Besides being areas of great natural beauty, Richmond Park in particular hosts many rare species of plants and insects as well as fine herds of red and fallow deer.
	Richmond Park was formed when Charles I decided he wanted a private hunting park. Noble Lords will remember that Charles I had a fine opinion of himself and his powers. He built a high, red-brick wall all around the park, created by the compulsory purchase of a great deal of farmland-to the consternation of local residents who regarded it as a theft of their countryside. Charles was persuaded to put ladders at certain points around the circumference of the park to allow pedestrian access and was forced by public opinion to allow poor people into the park to collect wood for fuel. This permission still exists today. Over 20 years ago, just for fun, I applied to the then Department of the Environment for a permit to collect wood in Richmond Park and was duly issued one. If any noble Lords are desperate in this cold weather, you can only take out as much as you can carry. Do not get too excited about it.
	The park carried on as a hunting park for the Royal Family and the aristocracy. Public access became more and more difficult until finally challenged by John Lewis-not of the partnership but a brewer in Richmond. After three years, in 1758 he finally won free access into the park for local people. The park has been open and there has been free access ever since.
	The main reason for the changes to the regulations for Richmond Park and Bushy Park is to raise revenue to rebuild the roads in them. These were originally sandy tracks, which have in recent years been covered in tarmac. They have never been properly metalled or constructed. This means that pollutants from the traffic drain into the park, destroying the special grasslands and thus the whole ecology of the park. Traffic has increased hugely over the years. Motorists use the park as a short cut on their journeys in and out of London. Visitors to the park use the car parks.
	Sadly, the Royal Parks Agency has presented only one option for consultation, and that is a substantial charge for parking. It did no surveys of the quantity of commuter traffic and counted only the cars that are parked and whose occupants stay in the park for long periods to enjoy the countryside with their families. It even assessed the socio-economic class and ethnicity of the people who use the park to try to justify the imposition of charges. It was a huge, expensive survey giving us only half the story.
	Why did it not consider other proposals? It has been suggested in the local press and elsewhere, including by local people, that it is the rat-runners through the park who should pay a charge towards the upkeep of the roads, not the people who drive a short distance from their nearest gate to a car park and walk or picnic in the park for long periods. Tens of thousands of people use the park as a short cut every week, never stopping at all. A scheme has been suggested using modern scanning technology to charge motorists who stay, say, less than half an hour in the park. It is used elsewhere and it could be used in the parks-a toll charge in other words. We pay one quite happily to cross the Severn Bridge. Why was this not considered and why was the survey not completed?
	It has also been suggested that a special fundraising committee be set up to raise money for the park. The Government do not allow museums to charge for entry, so why allow the Royal Parks to do so? Museums have always raised funds by public subscription, as, for that matter, have universities. Why not the Royal Parks?
	There is little or no public transport to Richmond Park, in particular, so people have no alternative but to use their cars, and charges would disproportionately affect those on low incomes and of course the elderly and disabled. Over many years, we have been promised transport to the park and, indeed, within the park by the Royal Parks Agency but it has never happened. Even if we had a bus, it would still be difficult to take several small children and the dog to the park for the day. I repeat: it is our countryside.
	I wish to make one final point. As pointed out by my noble friend Lady Hamwee, who cannot be here today because of family illness, car-parking charges would have an unneighbourly effect-indeed, it is mentioned in the consultation-as people find out that they can avoid the charge by using the streets around the park. Residents' parking schemes would have to be extended to weekends and holidays, and even to Christmas Day and Boxing Day, when residents make maximum use of the park. That would cause maximum disruption for the residents living around the park.
	The Tory Motion expresses unhappiness with the parking charges. It regrets the measure and asks the Government to withdraw it, but wishes to retain the other changes in the regulations enabling a reduction in speed limits and other improvements to the public amenity in the Royal Parks. Let us take a brief look at some of these. They include prohibiting the sailing of model boats in any pond except the model boating pond. That does not sound too crucial or urgent to me, unless of course noble Lords on the Conservative Benches spend their entire weekends sailing model boats on forbidden waters in the Royal Parks.
	Another new regulation exempts horse owners riding in the park from the obligation to clear up their horses' manure. In the 35 years that I have walked in Richmond Park, I have never seen a rider dismount to collect the horse manure. My husband, who has an allotment, would do it like a shot but he does not ride horses in Richmond Park and horse riders are not lobbying urgently on this issue. I have not had a single letter about it.
	Speed limits in Greenwich Park are important but the Government could bring in a statutory instrument to cover this and other issues next week if they wished.
	The Conservative Motion will do nothing except enshrine car-parking charges in Richmond Park and the Royal Parks, and Bushy Park in particular. The Government will not withdraw anything. If the Conservatives win the general election-it is quite a big if nowadays-I cannot see this piece of legislation about car-parking charges in Richmond and Bushy parks being top of David Cameron's list the day after the election. I cannot imagine him saying, "What must we do first? Yes, we must go for those parking charges". He will have many more problems to deal with than that one. We read in Conservative leaflets that they will "review" the charges, but that is hardly a commitment to get rid of them.
	It is said that fatal amendments have been won on only three occasions. So what? With your Lordships' support we can make it four times and force, not ask, the Royal Parks Agency and the Government to think again and look at better and fairer options. I understand the Official Opposition's reluctance to support a fatal amendment lest we get into the habit of tabling them when and if they gain power, but this is something called democracy. We are able to do this; it is on the Order Paper. I urge the House to support our fatal Motion and ask the Royal Parks Agency to prove that it is fit for purpose by taking a fresh look at methods of raising revenue for the Royal Parks. Let us have a bit of imagination and lateral thinking for a change, instead of going for the easiest and most unjust solution. I beg to move.

Lord Howard of Rising: My Lords, these regulations end free access to two great Royal Parks. They symbolise all that is wrong with the hole in the heart where new Labour's sense of tradition and fairness should be found. They are proposed by Mrs Hodge, whose base is on the other side of London in Barking. There are two visitors' car parks in Barking Park and I am told that there is no parking charge. Mrs Hodge spoke last weekend about the need to hear and respond to local people's concerns. What a pity that she was speaking only about Barking. Why will her Government not listen to local concerns when they come from Twickenham, Putney, Richmond and Kingston?
	I hope that the House will reach a common resolve tonight to ask the Government to withdraw these regulations but, first, I shall speak briefly to the Motion moved by the noble Baroness, Lady Tonge. This asks your Lordships-the unelected House-to reject a statutory instrument for only the fourth time in their history. The Liberal Democrat website rants about "betrayal" if your Lordships do not take this extreme step. Mr Cable, a local Member of Parliament-he must have escaped from the green room at BBC's "Newsnight"-says that it will be "silly politics" if we do not veto the elected House's regulations tonight. Mrs Kramer says that she is "utterly shocked" at the idea that your Lordships should not throw out secondary legislation. "Silly", "shock", "betrayal"-the Liberal Democrats never knowingly underegg a pudding; they protest far too much. Insults have never won arguments in your Lordships' House. I do not remember Mr Asquith or Mr Lloyd George saying that it would be betrayal or silly politics for this House not to veto a money-raising order from another place. In 1908, long before the People's Budget, Mr Asquith told cheering Liberal MPs:
	"I invite the Liberal Party tonight to treat the veto of the House of Lords as the dominating issue in politics-because in the long run it overshadows and absorbs every other".
	No doubt Mr Cable would have been tut-tutting behind Mr Asquith's back, rather as he does now behind Mr Clegg.
	However, I think this House should ask the Government to think again. That is why I have tabled a second Motion tonight, which I ask my noble friends to support. There are some good things in the regulations. Unlike the Liberal Democrats, we have no wish to deprive children of the pleasure of sailing boats on the model pond in Bushy Park-children doing so is actually rather a charming thought-we have no wish to stop private-hire vehicles driving in Richmond Park; and we have no wish to stop a 20-mile-an-hour speed limit in Greenwich Park. All those things would be killed by the Motion of the noble Baroness, Lady Tonge. We ask the Government to re-lay the statutory instrument without charges on access to Bushy and Richmond parks. My party has always opposed such charges, unlike the Liberal Democrat Richmond Council, which astonishingly wrote to the parks agency offering to send officers to help to design the charges. In consultation, 84 per cent of local people were against charges. Only a fatally arrogant Government would ignore such a majority.
	Ministers have two arguments: first, the Royal Parks Agency needs cash to do up its car parks and roads; and secondly, west London people are rich and can afford to pay. Neither stands up. Few things exemplify waste more than the slow urbanisation of our great London parks. Richmond and Bushy parks are beautiful because they are open and wild. Who wants tarmacked car parks, uniformed traffic wardens, bright spotlights and surveillance cameras? If we are looking for spending cuts, surely this is where to begin.
	On the upkeep of roads, why place a burden on local people who love the parks? If you really want someone to pay, why not the commuters, as the noble Baroness has suggested, who stream across the park daily without ever stopping? A simple toll could be operated with a sticker, from which the residents of neighbouring boroughs could be exempt. Such charges would raise just £345,000. A good proportion of that could be raised by voluntary contributions. If money must be found, let us have a more imaginative policy than dumping railway station-style car parks in our parks.
	The second argument is that people can afford it. Middle England has heard plenty of that kind of argument in the past 13 years. Look where it has got us: we are taxed to the gills and £187,000 million a year deeper in debt. Mrs Hodge says that 88 per cent of car park users are ABC1. What kind of argument is that? A bad tax is no better because those who pay it work hard.
	Look at the facts: 50 per cent of visitors driving into Richmond Park stay for one to two hours; 66 per cent come at least once a week; and a quarter-dog walkers, nature lovers, people who just like open space-come almost every day. Under these proposals they would pay over £450 a year. An analysis by my honourable friend Justine Greening MP suggests that two-thirds of park visitors would pay more than £100 a year. The average cost would be £213. One of the last free pleasures would suddenly cost a great deal. "Find out what they are doing and tax it", I am afraid, will be Gordon Brown's sad epitaph.
	This pointless measure is also an affront to an old, hard-fought-for privilege of the many, not the few. The Minister lists walking as his recreation. I wonder whether, as a walker, the Minister has the independence of mind to set aside his brief and say, "Yes, we will think again". We have only eight more weeks of this Government, so there is nothing to lose and a lot of personal respect to win.
	Bushy Park is 10 times the size of the Vatican City state and Richmond Park is five times the size of Monaco. If you are old, frail or ill or a woman with a child in a buggy there are parts of the park to which you cannot have access without a car. Such people should not be denied free access. Free access was won in the 18th century by two people, John Lewis and Timothy Bennet, who would once have been the heroes of Labour but whose legacy new Labour wants to set aside. John Lewis, already referred to by the noble Baroness, was a local resident who, in 1758, won a case against a Richmond Park ranger who tried to keep him out. The court ordered entry to the park to be free for all people. The judge said of the entrance:
	"I desire, Mr Lewis, that you would see it so constructed that not only children and old men, but old women too",
	may enter. How sad that 250 years later a Labour Government should again raise barriers against children, old men and old women who enjoy the heart of the park free of charge. Timothy Bennet was described by Gentlemen's Magazine as,
	"the honest presbyterian cobler of Hampton Court, who obtained a free passage thro' Bushey park which had many years been with-held from the people".
	When asked why, he ventured to say that ordinary people should have free access to Bushy Park. Bennet said:
	"I am unwilling to leave the world a worse place than I found it".
	Free access was duly restored. Now, 250 years later, a Labour Government should not be trying to deny free access again.
	I urge the Minister, as a walker, to honour the memory of two simple men who fought for the right of free access for many in the 18th century-to withdraw this statutory instrument and to think again. If he does not, I urge noble Lords to pass our Motion tonight. In so doing, I say bluntly to the management of the Royal Parks Agency, whom I trust read our debates, that-in spite of what the noble Baroness, Lady Tonge, says-if a Conservative Government are elected on 6 May these regulations will be rescinded and charges annulled. It would lie heavy on public officials who rush to spend money on the say-so of a dying Government before the people's verdict is heard and the new House of Commons has a chance to pass judgment on the regulations. The Minister should make himself popular with walkers in these great parks and stay the Government's hand. The parks agency would be well advised to stay its own hand before incurring costs and inflicting hurt on the many thousands who wish to enjoy the rights of free access, which were won by John Lewis and Timothy Bennet long ago. Tonight, as Timothy Bennet said, let us show ourselves unwilling to leave the world a worse place than we find it.

Baroness Hilton of Eggardon: My Lords, I declare an interest as chair of my local amenity group, the Teddington Society. Teddington lies to the north of Bushy Park in the borough of Richmond. For the past several months, we have been campaigning in association with the Friends of Bushy and Home Parks, the Hampton Wick Association and the Hampton Hill Association and with local MPs, such as Vince Cable, and parliamentary candidates, such as the Zac Goldsmith, against the introduction of parking charges in Bushy and Richmond Parks.
	Bushy Park does not have the same high profile as Richmond, but is much prized by the people of Teddington and the surrounding areas as, in effect, our local countryside. For noble Lords who are not familiar with the area, Bushy Park lies to the north of Hampton Court Palace and was originally part of its deer park and hunting grounds. It has some attractive 18th century features, including a recently restored cataract, various ponds and a woodland with a meandering stream. However, it is largely used as a source of recreation by local families who wish to bring their children to feed the ducks, to picnic, to fish in the ponds, to run about, or to play on the swings and see-saws in the playground.
	As a nation, we constantly express concern about obese children and the lack of opportunities for children to take exercise informally. Bushy Park goes a long way to counter those problems. To have those open-ended activities constrained by concerns about parking meters would alter the whole nature of the experience and relationship with the park.
	The Minister in another place has argued that there are good public transport links to Bushy Park. These consist of one bus an hour on the north side of the park and would then require a parent with small children to walk the mile to the south side of the park to the children's playground. I understand the financial difficulties of the royal parks but spending nearly £3 million on an unpopular scheme of parking meters and supervision is not the only possible solution. Bushy Park is bisected by a commuter route that is a short cut to Hampton Court Bridge. Hundreds, possibly thousands, of car drivers use this route every day. As the noble Baroness, Lady Tonge, suggested, it would be possible to introduce a charge using modern technology such as the congestion charge which would surely enable a toll to be placed on all cars entering the park and would not jeopardise the relationship between local residents and the park. I hope that my noble friend will give further thought to the need to introduce this statutory instrument.

Baroness Butler-Sloss: My Lords, I want to speak about Richmond Park. For more than 70 years I have enjoyed Richmond Park-as a small child, as I grew older and indeed, today, well not today exactly but recently. I have been a regular visitor to Richmond Park. I have walked, walked the dog, and had picnics. I have cycled, ridden horses from the local stables and I even skated on Penn Pond and tried to ski, but not very effectively, along with many others who took advantage of the snow in that year.
	It is not only people who live in the west of London who use the park. I now live in the City and I still go there, so I would be slightly sad if only local residents had a right to go and enjoy the park without having to pay a toll. As has already been said, Richmond Park and, indeed, Bushy Park, which I do not know so well, are wonderful places. But more importantly, they fulfil a need for the public to have recreation and exercise. That is one of the things that governments support, for goodness' sake. To have a toll on it is sad. As a former resident and going back now, I cannot remember a single bus that goes anywhere near any of the gates. I am thinking of Kingston, Richmond, Roehampton, Robin Hood and Sheen. There is a long walk. In Richmond, for example, there is no bus to take you up the hill to the Richmond gate. It is absolutely ridiculous to suggest, as the Explanatory Memorandum says in paragraph 7.1 that,
	"introducing parking charges in Richmond and Bushy Park is intended to encourage visitors to consider means of travelling to the parks other than by private car".
	Even if you ride you have to park your car beforehand, and, unless you are a cyclist, how do you take your picnic, dog, children and grandchildren to spend half a day in the park? There is no reasonable way to get there. The suggestion in paragraph 8.5 that discussions on improving bus services are being reopened is pie in the sky. That has been tried before and has never happened. This is not about the land train to go once round the park, which might be nice, but which would take up space, but the facilities to get to the park. As it happens the only way to get there to enjoy it is to go by car.
	It is extraordinarily sad, as other speakers have said, that this Government should want to deprive people of free access to one of the great amenities of west London. It is absolutely extraordinary that this Government would want to do that, and to take no notice of the 84 per cent of the respondents to the consultation who objected. Generally, cars are full of families, dogs and children, out for a happy day for picnics. It is a delightful and utterly respectable outing for families, so it is inappropriate and very unfair to have these regulations. I urge the Government to withdraw and reconsider them.

Lord Watson of Richmond: My Lords, I start by declaring two interests. First, I have been a resident of Richmond for 45 years and have gained tremendous pleasure from Richmond Park as has my family as they grew up. I know Richmond Park much better than Bushy Park, but for those who have not visited Richmond Park it is an astonishing place and a discovery. It is an extraordinary space in the heart of Greater London.
	I have a second interest to declare which is that I am chairman of Arcadia, which is the project implementing the Thames Landscape Strategy from Hampton Court to Kew. It is a project that has raised more than £4 million and has involved 105,000 volunteer hours, and it has been a tremendous success. Our report on the Arcadia project states that that reach of the River Thames flows through one of the largest open public spaces in London, which is an area that is unique in its combination of landscaped gardens, habitats, parks and vistas. Richmond Park and Bushy Park are integral to both the project and concept of Arcadia. It has been said of this English landscape and its environmental significance that it is one of the most important and influential gifts that England has given the world, along with the English language and democratic parliamentary government. I am pretty keen on the English language and pretty keen on parliamentary government, and this is the third part of the trilogy.
	It is entirely appropriate and proper that Parliament has a chance tonight to stop this proposal to impose car parking charges in the parks. The environment and the views of Arcadia were first protected by an Act of Parliament just over 100 years ago-indeed, it was a measure introduced in the House of Lords. It was partly to mark the 100th anniversary that we started the Arcadia project in 2002. That Act of Parliament specifically safeguarded the view from Richmond Hill-the view from the terrace and gardens that abut the park. Richmond Park is the great space that lines and protects the Thames landscape. It covers 2,500 acres, which is arguably the biggest park in London, with vistas unmatched and treasured by every generation since Charles I was first challenged to open it to the public. The thrust of Arcadia has been to restore the vistas that link the area, including incidentally the view from the park to St. Paul's Cathedral, and to enhance access. This has happened with astonishing speed and success. Yet-I address particularly the Government Front Bench-tonight we have a move to impose via the Royal Parks Agency substantial charges for parking, which would put a price on access. It is a proposal which can and should be stopped unequivocally tonight.
	Why? The aim of this proposal is to raise money for a number of purposes, but arguably the most important would be to improve the roads that criss-cross the parks, which are of course already heavy with passing traffic. In effect, these motorists are taking a short cut through the park. Yet, those who come to visit, to view and to enjoy the park will be penalised, but not the motorists who are passing through.
	This is a quite extraordinary proposal. What would be the result if this happens? Hundreds of thousands of people visit the parks. If they are deterred by the charges, which will be substantial, as has already been quoted, they will either not come, which would be a terrible pity, or they will park in neighbouring streets, greatly add to congestion in those streets and inconvenience the residents. There is huge concern about this issue among these residents. The figure of 84 per cent has already been quoted today. There is well nigh universal opposition to this proposal.
	Now we come to the strange business of the Conservative Motion. Why are the Conservatives not joining us tonight in support of this fatal Motion? There is a clue in the fact that thousands of households in the Richmond Park constituency have today received a notice. It is described as an "important notice" and comes from the prospective parliamentary candidate for Richmond Park. In bold print he declares:
	"The Conservative Party is absolutely committed to scrapping the charges-if we win the election".
	There is the rub. He then adds,
	"and we are trying to stop the charges even before then".
	I suppose that the "before then" means winning the election.
	If that is the case, why do we have this regret Motion? To regret is one thing; to stop it altogether is another. So why propose a feeble Motion instead of a fatal Motion? Why so queasy? I am told that fatal Motions do not appeal. They are perhaps too brutal, too bold and too decisive. The position tonight is clear. We should not regret: we should act and stop this proposed tax-because that is what it is-on the public spaces that so delight.
	Free access to Richmond Park and Bushy Park needs to be preserved and protected for all who want to visit and enjoy what the young Alexander Pope called the brightest beauties-superior to "distant fields". It was so then. It is so now.

Lord Brett: My Lords, I am grateful to all noble Lords who have contributed to this short debate. In particular, I thank the noble Baroness, Lady Tonge, for her contribution. I know that she is a great supporter of the royal parks and Richmond Park in particular. I got clearly from the noble Lord, Lord Howard of Rising, if I did not realise it before, that there will be a general election. It will not be more keenly fought or fought with more passion than in the Richmond area. That is clear also from the contributions.
	All contributions made clear just how much the royal parks are cherished, not only in this House but by the millions of people who visit them every year. As the noble Baroness, Lady Tonge, pointed out, each of the eight parks consists of a listed landscape, and they comprise 5,000 acres. They are enjoyed as places of relaxation, recreation and retreat, and they provide a backdrop to many ceremonial events. As the noble Baroness rightly said, they also provide valuable conservation areas and important habitats for wildlife.
	A number of passionate views have been expressed today opposing the parking charges for Richmond Park and Bushy Park. I have not found the arguments particularly compelling, for reasons which I hope to explain. First, in recognition of the special nature of Richmond Park in particular, but also Bushy Park, Richmond is particularly unusual in that it has a triple whammy: it is a designated site of special scientific interest, a national nature reserve and a European special area of conservation. As long ago as 1996, Dame Jennifer Jenkins in a report on Richmond Park stated:
	"Measures must be taken to alleviate existing pressures and ... to prevent future traffic growth".
	The report went on to say that in cities and elsewhere, charges have become an acceptable means of sharing the use of existing parking space and encouraging some people to make greater use of public transport. Richmond Park should be no different. She also made observations about Bushy Park.
	Anyone visiting the parks can see the obvious negative impact of traffic. It is not unusual to see cars queuing along the road outside the park waiting to enter the car parks. At popular times, parking areas can be full by mid-morning. Not only does that diminish the special ambiance of the parks, but it leads to degradation of the roads and the car parks, as has been emphasised by several speakers. It is estimated that £2.7 million is needed to be spent to bring the car parks in Richmond Park up to an acceptable standard, including-this is an important point-installing environmentally appropriate petrol interceptor drainage that will reduce the pollutants entering the soil, which the noble Baroness mentioned in her opening speech. Maintaining the roads, the car parks and other park infrastructure is an ongoing process. The fabric is under constant pressure. It is estimated that the accumulated works maintenance and liability across the royal parks is £58 million.
	Noble Lords have referred to access. The royal parks are free to everyone and will remain so. There is no question of access being denied. We are looking at the cars that enter not for access but to park. We do not want to create barriers to people visiting the park. We want to encourage people to visit by means other than their car when they can. As has been quoted in the percentage figures, I recognise that there has been a great deal of local opposition to introducing charges. In some ways that is not really surprising.
	Who enjoys paying for parking, particularly if it has been free in the past? But it is wrong to suggest that what is being proposed for Richmond Park and Bushy Park is in any way exceptional. It is not. All the other royal parks with public parking provision-Greenwich, Regent's Park and Hyde Park-charge for parking and have done so for a number of years. In the past three years, parking in those car parks delivered to the agency a net income of £1.4 million, all of which was reinvested into the parks. Many local authorities, public bodies and private facilities charge for parking. In and around Richmond and in Bushy Park, the parks could be said to be unusual in that parking remains free.
	Much has been made of the substantial charges being made. It has been suggested that it was wrong in some way to measure the socio-economic background of people using the park. But, as one of the criticisms was a fear that poor people, rather than less-poor people, would be particularly impacted, it was sensible to find out who uses the park on a day-to-day basis. Therefore, I do not apologise for that inquiry or for the results which show very much that socio-economic groups A, B and C use the park most extensively, whereas socio-economic groups D and E use them only to the extent of 4 per cent or 5 per cent.
	The proposed level of charge is 50 pence for an hour, up to a maximum of £2 for a whole day in Bushy Park, and £1 an hour, up to an all-day maximum of £3 in Richmond Park, which I would argue is not excessive. Indeed, it is and will remain less than that for other royal parks. Blue badge holders will not be charged for parking. The charges are not set in a manner that would make them punitive, but we lack some form of deterrent. At the moment, there is no disincentive whatever to bringing your car into the park, even for those who live a short distance away. It is estimated that 17 per cent of the users of Richmond Park and 31 per cent of the users of Bushy Park live within a mile of the parks.
	The noble Lord, Lord Howard of Rising, went to great trouble to look up my hobbies-I am very flattered-and he pointed out that walking is one of them. Yes, it is, and I recommend Talkin Tarn, which is the remainder of an Icelandic lake near Brampton in Cumbria. You cannot get there by public transport but you can park your car, for which you are charged. I recommend it as a place to walk round; it is spectacular. It is in the charge and ownership of Cumbria County Council, and therefore Cumbria taxpayers like me pay council tax and also pay for the privilege of parking there.
	The Royal Parks do not belong to the borough of Richmond or to the people of London; they are national treasures which belong to all of us. The good burghers of Richmond in Yorkshire are paying the same contribution as the burghers of Richmond in Surrey, so, in that sense, the charges cannot be excessive.
	The question of public transport links to Richmond and Bushy Parks brought out a great deal of sympathy among noble Lords. Several bus routes stop within walking distance to the parks but I accept that, for some people, travelling there by public transport could be inconvenient. The Royal Parks Agency has offered to accommodate a public bus service to Richmond Park, subject to appropriate support from local authorities and transport for riders. I understand that negotiations are ongoing-I do not necessarily share the pessimism of the noble and learned Baroness, Lady Butler-Sloss, on this-and that the agency is also looking at the viability of a land train through Richmond Park.
	The noble Lord, Lord Watson of Richmond, referred to the problem of displacement. One can see that people have a reasonable concern that all that will happen is that drivers who do not want to pay the charge will park their cars in the surrounding streets. The agency realised that that concern had some traction-if you will pardon the pun-and so commissioned independent research on the issue. That research came to the conclusion that displacement parking in the streets around the parks was unlikely to occur as a result of charging. The boroughs surrounding the parks have a range of parking control measures at their disposal already, including controlled parking zones, of which some are already in place.
	On the issue of bus services in the areas of the parks, I am told that 10 bus routes run in the vicinity of Richmond Park and a dozen in the vicinity of Bushy Park. While the railway stations around Richmond Park are some distance away, the stations around Bushy Park are only some 15 minutes away. It is true, as has been said, that this will have some impact on those who are physically impaired and on families who have to carry their goods for picnic. If you are going for a picnic and a day out in London in 2010, the imposition of a charge of £2 for Bushy Park and £3 for Richmond Park does not appear unreasonable.
	The key point of toll roads was made eloquently by both my noble friend Lady Hilton and the noble Baroness, Lady Tonge, in moving her Motion. We considered the issue of using road tolls as an alternative in both 1998 and the early part of this century. I can see why the suggestion would be supported by those who would prefer it to the parking charge, but when we tested this in 2002 only 20 per cent of those consulted had a favourable view of road tolls and 67 per cent opposed them. So if we introduced them, all we would do is change the lobby of opposition from static to mobile and from the immediate environs of Richmond and Bushy Parks to a slightly wider area. Although the issue may be looked at again in future, at present there are no plans for toll roads.
	It has also been suggested that the measure is being forced on the agency because of cuts in its aid grant and a demand that it raises more of its own revenue. It is true that the Royal Parks have been highly successful in raising income-from £3 million in 1997-98 to £13 million in 2008-09. This has reduced the agency's dependency on the public purse, which must be a good thing as we go into an era of greater public stringency in the revenue and income available for investment in public services, a point which has been stressed in particular by the opposition parties. However, the key is that the agency invests back into the Royal Parks all the moneys that are raised.
	The proposals that we are putting forward in these park regulations are about managing the parks for the benefit of the present and future generations. Some have criticised the proposals as exceptional and unreasonable; I hope that I have proved that they are not inasmuch as they already exist in other Royal Parks. As I have said, the Royal Parks are funded by central government and have an international reputation. They need to be continually managed in the light of new challenges and the changes in behaviour of visitors, or the danger is that we will destroy the very things that we value so much.

Baroness Tonge: My Lords, I thank all noble Lords who have taken part in the debate. In particular, it was a great pleasure to hear the warm words said about Richmond and Bushy Parks. The Minister has not addressed the issue of the pressure caused by through traffic using the park as part of the road network. This is a problem for Richmond Park. The problem is not the people who go to the car parks to enjoy the park for the day and to picnic, it is the through traffic-and that does not apply to all parks.
	The Conservatives seem to agree with us on every point-there is no dissent on the issue whatever-except that they are too scared to support a fatal amendment which would stop the Government in their tracks and make them, when and if they win the general election, rethink this question and consider tolls instead of car park charges.
	There would have been no debate on this issue if I, a former Member of Parliament for Richmond Park-yes, Richmond Park-had not been persuaded by the present Member for Richmond Park, Susan Kramer, to table this fatal amendment. I wish to test the opinion of the House.

Division on Baroness Tonge's Motion
	Contents 48; Not-Contents 71.
	Motion disagreed.

Motion to Resolve
	 Moved By Lord Howard of Rising
	That this House regrets that Her Majesty's Government have laid before Parliament the draft Royal Parks and Other Open Spaces (Amendment) etc. Regulations 2010 despite the public objections to the imposition of parking charges in Richmond Park and Bushy Park; and therefore calls on Her Majesty's Government to withdraw the draft Regulations and to replace them with Regulations that do not contain such parking charges, but which enable the reduction of speed limits and other improvements to public amenity in the Royal Parks.

Lord Howard of Rising: I beg to move.

Division on Lord Howard of Rising's Motion
	Contents 136; Not-Contents 71.
	Motion agreed.

Financial Services Bill

Bill Main Page
	Copy of the Bill
	Explanatory Notes
	Amendments

Committee (1st Day) (Continued)

Debate on whether Clause 1 should stand part of the Bill.

Baroness Noakes: My Lords, I have given notice that we oppose Clause 1 standing part of the Bill and, for the convenience of the Committee, I have grouped Clauses 2, 3 and 4 stand part with Clause 1, as my reasons for opposition strike at the totality of these clauses and not merely at Clause 1.
	The Council for Financial Stability is not much more than the tripartite arrangements given a fancy title. A couple of pages of legislation cannot create substance when none exists. We know that the only reason why the tripartite arrangements are being preserved in the Bill is that they were invented by the Prime Minister, and there is no recorded occasion when he has admitted that he personally has got something wrong. It is not in his nature.
	That the tripartite arrangements failed is not just the opinion of my party; it is also the opinion of the Labour-dominated Treasury Select Committee in another place. That is what it found in its report on Northern Rock, entitled The Run on the Rock. Turf wars between the three parties meant that even when issues were identified nothing was done. The tripartite authorities had hardly met formally at principal level until the Northern Rock crisis. The bank issued careful analysis of the excessive leverage building up, but the three did not sit down to discuss the issues. In a rational world, the Government would have looked at the arrangements and concluded that they were bust and needed to be radically overhauled. Instead, we have the cosmetic, window-dressing solution of these clauses, which make the parties meet to discuss the analysis that each produces. If anyone thinks that this is more than a superficial approach, they need look no further than the evidence of the Financial Secretary to the Public Bill Committee in another place when he said:
	"What we are doing through the Council for Financial Stability is formalising arrangements that have already been in existence".-[Official Report, Commons, Financial Services Bill Committee, 8/12/09; col. 5.]
	There we have it.
	This Bill will give us nothing more than the failed tripartite arrangements. There is nothing in this new council to give us any confidence that they will not fail us again. Doubtless, if exactly the same circumstances arose, while those on the council have the memory of the recent financial crisis still in their minds, the same mistakes will not be made. The Banking Act 2009, which we supported, created more efficient tools in the special resolution regime. We will have no confidence that the old arrangements in their new clothes will be able to anticipate, let alone respond, to any new crisis. As the director of the Building Societies Association said when he gave evidence to the Public Bill Committee in the other place:
	"Of itself it is not going to prevent the next bubble, it is not going to prevent the next banking crisis".-[Official Report, Commons, Financial Services Bill Committee, 10/12/09; col. 70.]
	We oppose these clauses because they do not address the fundamental flaws in the structure created in 1997 by the Prime Minister. The big idea of the first few days of the then Chancellor was monetary policy independence for the Bank of England, which has been widely supported. But he was not content with one big idea; he had to have another one, which involved wrecking the link between the detailed work of banking supervision, which we now refer to as micro-prudential supervision, and the overall understanding and analysis of developments in financial markets, which we now refer to as macro-prudential supervision.
	The Prime Minister deluded himself that he was generating value by creating the huge organisation of the FSA out of the various supervisory bodies already in existence and transferring to it the Bank of England's banking supervision role. We now know that he destroyed value because the dislocation between micro and macro-prudential supervision meant that the build-up of excessive debt went almost unnoticed and was certainly not acted upon. The Bank of England, with its rather ill-defined non-statutory function relating to financial stability, did analyse it, but nothing happened in practical terms. The Chancellor was not interested because excessive borrowing was what was underpinning the illusion of a bust-free boom. The FSA, if it was interested, did nothing.
	Even the Prime Minister knew back then, in 1997, that he was playing a dangerous game and that the system would be more vulnerable with three separate players in the area of financial stability. At least, I think that that is why he created the tripartite authorities with their own memorandum of understanding. He must have realised that his new structure had gaps and that something needed to compensate for that. It did not work and this country is paying the price for the failure of the tripartite arrangements.
	The Government's narrative has always been that all of the problems derived from the global financial crisis. We do not deny the existence of the global financial crisis, but the way that it hit the UK, which has a uniquely high dependence on the financial services sector and a small number of systemically important organisations, can be laid at the door of the tripartite arrangements. The UK cannot blame what happened wholly on the rest of the world because the architecture created by the Prime Minister when he was Chancellor was itself a big part of the problem when put to the test.
	That is the background to my party's policy, which is to ensure that never again will micro-prudential supervision of systemically important organisations be severed from macro-prudential supervision. The shorthand for this is returning banking supervision to the Bank of England, but it is of course much more than that. Under our proposals the bank will assume more responsibilities than it shed in 1997.
	We all know that there is not one model of supervision in the main financial centres and that the impact of the global financial crisis cannot be correlated with any particular supervisory architecture. However, it is interesting to note that the US has recently decided that the Federal Reserve Bank will continue to supervise systemically important banks. The tide is not running towards the separation of macro and micro-prudential supervision.
	In addition, we will be separating out of the FSA its consumer functions and placing them in a separate consumer agency. Anyone in the City will know that, until the last couple of years, the FSA was dominated by its treating-customers-fairly agenda. I do not know how or why this happened; that will repay careful study at some time. In our view it contributed to the FSA's lack of focus on prudential supervision. This, too, will not be allowed to happen again. Both consumer protection and prudential supervision are important, but they are not the same and they should not be confused in the same body.
	Whether or not the population of our country allow my party to form the next Government in a couple of months' time remains to be seen. If we do form the next Government, we are quite clear that Clauses 1 to 4 of this Bill are not part of our vision of the future arrangements for financial stability. However, even if we do not form the next Government, we would still oppose these clauses. They are half-baked for the reasons that I have outlined in other amendments today. They do not answer who is in charge or deal with the powers that are needed. Most importantly, they are a mere cosmetic patch applied to conceal what ought to be made plain-that the tripartite arrangements did not work and are unlikely to deliver in future. For these reasons we oppose these clauses standing part of the Bill.

Lord Newby: My Lords, we disagree with both the analysis and the prescription that the noble Baroness has just given. In terms of the analysis, she places a pretty large burden on the tripartite arrangement-the architecture for the problems which we faced in the UK-and yet she said that the Chancellor was not interested in the asset bubble. From evidence that he gave when I was a member of the Economic Affairs Select Committee of your Lordships' House, we know that the Government did not believe that the Bank of England should worry about asset bubbles either. Let us suppose that, at that stage, only two bodies were responsible for supervising the macroeconomic financial situation-a Chancellor who was uninterested, and a Government who did not believe, that the bank should be worrying about bubbles. Would that have changed the way that matters went? No, it would not. The Government and regulation were caught up in the bubble just as much as the banks were. Therefore, to argue for the collapsing of three into two, when the heads of the two were not interested, as the noble Baroness has just said, seems not to be an effective analysis of why we got into the mess that we did.
	As for the prescription, my question for the noble Baroness and her colleagues who are going to speak is: why, when I go and have meetings and dinners in the City or meet people who work there, do at least three-quarters of them not believe that this is an effective change and believe that it is merely changing the name plate on the FSA's door? That is the reality of this. I know that the noble Baroness and some of her colleagues, such as George Osborne, believe firmly that this will be an effective answer, but they are in a minority in the City. This seems to me, as someone who does not work in the City but observes it and talks to people in it, to be a serious flaw-it is going to be a problem for her party.
	No one can claim that the tripartite system worked well, or that any system anywhere worked well. As the noble Baroness said, the success or failure of the system cannot be correlated with any financial supervisory architecture. We agree. The key thing that has changed, and that needs to change, is the attitude of the people at the top. The shock that they have been given by this terrible collapse will mean that their attitudes are now very different from those that they adopted before. Those attitudes are not coloured in the slightest by whether they are part of the FSA, part of the Bank, part of a duopoly running the system or part of a tripartite arrangement. It is a question of experience and changing attitudes. The best hope for an effective regulatory system is the shock that they have had in terms of the way that they manage their regulatory affairs, rather than the structure in which they operate.

Viscount Trenchard: My Lords, I support my noble friend Lady Noakes in her opposition to these clauses standing part of the Bill. I firmly believe that it is necessary that the Bank of England should again assume ultimate overall responsibility for financial supervision. Call it macro, micro or what you will, the separation of the macro from the micro was undoubtedly a contributory cause of all parties' eyes being somewhat off the ball as the financial crisis developed.
	The noble Lord, Lord Newby, suggests that three-quarters of those who work in the City do not agree with my party's solution to the problem, to re-empower the Bank of England as being in overall charge of financial supervision. However, what answer does the noble Lord think he would get if he asked people who work in the City whether they think that the FSA has correctly and properly conducted financial supervision over the 10 years or more that it has been in existence? He might find that, again, at least 75 per cent of those who answered said no. In my experience, most people think that the FSA was too much an internal organisation, having meetings with itself or going to harmonisation conferences all the time and not actually spending enough time on prudential supervision. Why? Because it was separated from the real, ultimate responsibility for the macro-prudential supervision, which was at the Bank of England.
	Whether the FSA is completely abolished, or is simply made to report to the Bank of England with regard to prudential supervision, does not matter so much. If the noble Lord asked people in the City whether they thought that the FSA ought to report ultimately to the governor or to the Bank of England, again he would find that a majority of practitioners supported that view.
	It is clear that Clauses 1 to 4 are purely cosmetic and that the financial stability council is no different in composition or function from what was there before. It is a totally inadequate response to what has happened, and therefore I wholly support my noble friend's opposition.

Lord Higgins: My Lords, I cannot recall an occasion in either House when a debate has had such a surreal atmosphere about it. We know that it is inconceivable that this clause is likely to become law, yet we are going through the motions of debating and amending it. We have had a number of interesting debates on various aspects of economic management, but the reality is that this clause simply formalises the failure of the tri-part system. Instead of getting rid of it, the clause continues the process and merely seeks to ensure that the people in the tri-part system do their job in the way which they ought to be doing without any legislative provision whatever.
	One of the important things that we need to do about regulation in the City is to restore the authority of the regulators. It used to be the case that the authority of the Governor of the Bank of England was hugely influential. It used to be said that even his raising his eyebrows was sufficient to terrify bankers. That is no longer the case, but we can do something to avoid a situation where authority is divided between the governor on the one hand, with his historic role in these matters, and the FSA on the other. Therefore I believe that the proposals put forward by my party concerning this are entirely to be supported, and that the continuing division of authority as the Government propose in the Bill is certainly a mistake.
	We have debated a number of aspects of this clause, but I want to raise one other point. There is at the moment a fashion to invent new economic expressions, of which the most pervasive is that of quantitative easing, when all one used to refer to was increasing the money supply. Now we suddenly have another: macro-prudential regulation. It is not the least bit clear what that means. In fact, it is likely to lead to considerable confusion because there are two separate things.
	The first is the macroeconomic management of the economy. It is certainly important, to avoid future disasters of the kind that we have just had, that that should be operated properly. However, that is rightly the concern of the Treasury and to some extent the Bank of England, with the powers which the present Prime Minister gave it back in 1997-98-although, as I have pointed out on many occasions in this House, monetary policy was not transferred to the Bank of England; all that was transferred was the right to set a single interest rate in the hope that other people would follow. Control of the money supply continued to be taken away by the then Chancellor of the Exchequer by removing the Debt Management Office from the Bank to the Treasury. We therefore have an extremely unsatisfactory situation regarding the macroeconomic management side.
	However, we also have the question of microeconomic management and regulation, which at the moment falls to be undertaken jointly by the FSA and, to some extent I suppose, by the Bank. The use of that expression "macro-prudential regulation" totally confuses the distinction between macroeconomic management on the one hand and micro-regulation on the other. That might affect major banks of a very significant size that may put forward or introduce macroeconomic instability into the economy. However, that is really a separate operation from macroeconomic management. It is important not to use this expression, which I believe is rather fashionably used by the FSA, to confuse one thing with the other. Having said that, I remain of the view, as my noble friend knows, that this clause is mere window dressing. It is not likely to do more than formalise the problems we have faced over the past few years, and to that extent it is not the way to go forward.

Viscount Eccles: My Lords, I believe this is the answer to the noble Lord, Lord Newby, as to why it is wrong to persist with the FSA in its present form. If you start a very important and large institution, which had forebears, and it is a failure, it is very seldom-I should like the noble Lord, Lord Newby, to find me an example-that anyone can put the culture and performance of that institution right. Institutions acquire a character of their own in their very early years. When it goes well, it is brilliantly unchangeable, whoever happens to be in charge. But if they acquire the wrong character right at the beginning, it is virtually impossible to put them right.

Lord Whitty: My Lords, I apologise to the noble Baroness that I was not in the Chamber to hear her speech, but I was watching it on the monitor. I am afraid she provoked me to come across here to intervene in the debate on this clause standing part.
	At one point she said that one of the problems with the FSA was that it was taking too much time engaging in consumer protection. I declare my interest as chair of Consumer Focus. That canard, which has run through quite a lot of commentary on the failures of the banking regulation system, is a complete misinterpretation. We have to ask ourselves what the banking system is for. The banking system is not for itself, nor is it for the City of London. It has a good benefit on the balance of payments in making a profit, and we should recognise that, but essentially the banking system is to provide the oil and the money to ensure that the rest of the economy and society operate. Its responsibility is to its depositors, to those who take loans from it and to the other people who take up its financial services. It is therefore an absurd argument to say that the regulator has undermined the industry by forcing it to take too much notice of its customers. If you step back and think whether it could make sense to apply that to any other industry, then the absurdity becomes apparent.
	I had some criticisms of the FSA and the way it pursued its consumer protection agenda-I still have, and I still have some concerns that the Bill might be slightly diluting that. However, the alternative which the noble Baroness and, as I understand it, the Conservative Party are proposing is the abolition of the FSA and the complete separation of the issue of supervision of the financial system from its responsibility to its customers. There will be another quango with no leverage and much less authority which will look after consumer protection. That is a move in completely the wrong direction. We need to associate all forms of supervision of the financial sector with its responsibilities to the business and individual consumers of the services of that industry. If that fails, then it is not just the banking system or a few banks which fail; it is the whole economy, with wider implications for society, individuals and families.
	This is admittedly a pretty substantial failure of financial regulation here and in other parts of the world. However, if the conclusion we draw is that the regulators should stop worrying about consumers, whether they are businesses or individuals, and start worrying solely about macroeconomic affairs, then that is the wrong conclusion. The two have to go together. The banks have to operate on a prudential basis, and they should be supervised more effectively by the regulator in that regard. That also has to go with the way in which the banks are performing a service to the rest of us.
	Therefore, the solution that seems to be behind the opposition to this clause standing part, and the policy of the Opposition in this regard, is taking us down a blind alley. I much prefer, with a few criticisms which I may voice later in Committee, the approach that the Government are taking to tighten up the regulation and leave a regulator which is looking after both sides of the performance of the financial sector, and not just one.

Lord Hodgson of Astley Abbotts: My Lords, I, too, support my noble friend in opposing that these clauses stand part of the Bill. In the past three or four hours we have teased out of the noble Lord, Lord Myners, several interesting aspects of these clauses. We are essentially formalising an existing structure. It did not work that well and a lot of the top people did not turn up, but good deputies came so that was all right. When push came to shove, it did not work at all well, so we will put some more bells and whistles on it and give it a bit more formal structure, which will now make it fit for purpose.
	We have had no answer as to how it will work with three independent bodies, each with its own independent strategies. How will they be co-ordinated, how will they pull together and how will they avoid duplication and overlap? Some of the points that the noble Lord, Lord Whitty, made are applicable here. Who will take responsibility for some of the points that he has raised? Where I agree with the noble Lord, Lord Newby, is over the need for some analysis. We need to consider carefully how we can draw the best lessons from the crisis that we have been through and are still going through. It is a shame, therefore, that the Government saw fit to oppose my noble friend's amendment, which sought after the truth.
	As the noble Lord, Lord Desai, told us, the financial world is cyclical by nature. It is said, in the vulgar phrase, that the City is a battle between fear and greed. At the moment, fear has the upper hand but it will not have the upper hand for ever. In this case, the Government are following the old saying that generals prepare to fight the battles of the last war. This structure is designed for the last war. The next war will not at all be in this shape. We are creating a bureaucracy and structure that will not help us to look forward; it looks backwards. Because this structure is not fit for purpose, I support my noble friend in opposing that this clause stand part.

Lord Howard of Rising: My Lords, I also support my noble friend Lady Noakes. Before so doing, I will say how much I agree with the comments of my noble friend Lord Higgins about the corruption of language. It seems that every time the Government have something unpleasant to say, they invent a new word and hope that people will not notice what it means.
	I have already made known my views on splitting authority for any enterprise, let alone one that is as important to the well-being and prosperity of Great Britain as the financial services industry. I will not waste the Committee's time by repeating those arguments, except to say that the Minister has not been in the least convincing that, with responsibility split three ways, there is anything but another disaster in the making. It has been clear from our debate, as several of my noble friends have pointed out, that the proposed arrangements are nothing but the old ones in a different piece of rather shoddy wrapping paper. There is nothing fundamentally new. I wish only that there was some way that the Government could come to their senses and see that they are in the act of perpetuating a horror story.

Lord Hamilton of Epsom: My Lords, I will pick up the remarks made by the noble Lord, Lord Whitty, about the FSA. It is rather remarkable that we are asked to stand here and say that the FSA is the most magnificent organisation and should be left in place. It seems quite obvious that the FSA has failed abysmally. This is despite the assurance that I have been given by the noble Lord, Lord Myners, and which was mentioned earlier when we discussed my amendment, that all the people responsible for banking regulation have been moved over into the FSA. So in theory, if everything was going to go on as it was before, under the Bank of England, the regulation of banks would continue and that would all go very smoothly. Quite clearly, when we look at Northern Rock, that was not the case. Northern Rock was an abysmal failure, and much of the blame has to be placed at the feet of the FSA.
	One of the problems which the noble Lord, Lord Whitty, might admit is that when it comes to regulation, the people who are sharp and on-the-ball and make a lot of sense go off and make money and earn enormous bonuses and God knows what else. The people who cannot do it-and I hate to say this and have no wish to demoralise the FSA-are the people who end up working as regulators. So they are all behind the curve anyway and the people they are trying to regulate are a hell of a lot cleverer than the people in the FSA.
	If we look back on the Bank of England, it had a much better reputation for being slightly ahead of all the people it was trying to regulate, rather than behind them. That is certainly not true of the FSA, which proved itself to be very good at protecting consumers-taking up complaints from people who had invested their money wrongly-and I have no objection to the role it played doing that. However, when it came to the big decisions, as to whether it should actually move in on Northern Rock, and deem the whole of its business plan completely faulty, totally indefensible and unworkable because it was borrowing short-term money and lending long, that is when the FSA completely failed. Therefore, I cannot understand why we should have any confidence in the FSA.

Lord Northbrook: My Lords, I support my noble friend Lady Noakes in her opposition to Clauses 1 to 4. This Bill is the Government's response to the worst financial crisis in living memory, but it leaves a discredited regulatory regime firmly in place. The failure of the tripartite authorities to anticipate, prevent or even mitigate the damaging effects of the crisis is there for all to see. However, rather than tackling the confusion inherent in the regulatory structure, which led the Governor of the Bank of England to ask who was in charge, the Bill simply puts the tripartite standing committee on a statutory footing, operating under terms of reference practically identical to the Memorandum of Understanding that governed the old standing committee.
	This measure is misconceived, because it fails to get to the root of regulatory failure. We need real regulatory reform, learning the lessons of the financial crisis. Real reforms mean an enhanced role for the Bank of England, including putting it in charge of prudential supervision of all significant institutions. As the noble Lord, Lord Howard, has said, in the old days, the Bank of England genuinely seemed to be ahead of the game. But in cases such as Northern Rock, it seems to me that the FSA supervisors had expertise only in insurance matters, so no wonder they failed to realise that Northern Rock's lending was expanding at a completely uncontrollable rate, and it was lending at 120 per cent of property values. I support my noble friend.

Lord Davies of Oldham: My Lords, this has been an extensive and interesting debate, with a number of cross-currents. The Government's position is quite clear: we seek to retain these clauses in the Bill. I emphasise the context in which we are working. In the White Paper Reforming Financial Markets, the Government undertook a considered analysis of the financial crisis. I understand the points noble Lords have made about things that went wrong. Of course things went wrong: that is why we had a White Paper and why we have legislation derived from it.
	However, let us be clear when we are critical of the existing standing committee and the wider tripartite arrangements, which we have sought to reform, that in so far as our institutional framework did not stand up effectively to the crisis that occurred, nor did any other institutional frameworks. The simple fact is that the Opposition make a great deal of criticism of the structure that was in place in the United Kingdom, particularly regarding the Financial Services Authority-and I of course recognise the validity of that criticism. That is why we are proposing reforms of the FSA; but one cannot conclude from that that the structure was wrong, particularly as the Opposition in all their contributions have not indicated why other institutional structures different from this framework also failed. They suggested that we are fighting the last war, which is always an easy epithet to put to anyone concerned with analysing a problem in order to do better in the future, but it is at least as important to learn the lessons of the past to make the reforms necessary to ensure that we make a better fist of the situation in the future.
	It is what the regulators actually do and the judgments which they exercise that count. The creation of an institutional framework whereby the regulators can exercise their judgment is important, but that is what counts-the judgment. I accept what noble Lords have said-that there were mistakes by the FSA. They have been well documented. Over the past two years we have rehearsed in this Chamber and the other place weaknesses in the position. That is why this Bill provides for an operation of the three institutions that is different from what obtained in the past. However, I shall not accept that the institutional structure per se was responsible for the financial crisis which overwhelmed every significant economy in the world. Every institutional structure failed accurately to foresee that position.

Baroness Noakes: The Minister is stretching his argument a little too far. Why was Canada not "overwhelmed"? I use his word.

Lord Davies of Oldham: The noble Baroness points to an economy of far less significance than that of the United Kingdom. All the economies that are more comparable to the UK economy, and therefore are subject much more to the challenges of financial actions by significant actors, followed the pattern which we followed. In many ways, it is a reasonable analysis to say that others went earlier. After all, in terms of the real problems with regard to the banks' toxic assets, the issue was much more apparent and happened earlier in the United States of America than it did here. Noble Lords identified that Northern Rock was a serious failure. Indeed it was, but I cannot remember any noble Lord from the Opposition rushing to support the Government when we actually produced legislation to deal with Northern Rock. I cannot remember any commitment to match the Government's action in those terms. I understand that the Opposition did not object. There is a difference between not objecting to what the Government are doing and being at the forefront of action that should be taken. When the Government moved in on Northern Rock, there was plenty of critical comment about that.

Baroness Noakes: My Lords, the Minister is getting a bit carried away this evening. If we look back at the Northern Rock legislation, it was not just that my party did not object; we took every possible step to assist the passage of that Bill, which of course involved dispensing with all the usual intervals and expediting the process. As it happens, I was not here but my noble friend Lord Hunt handled that Bill with my noble friend Lord De Mauley. I am well aware that my party bent over backwards, not only here but in another place, to ensure that that legislation went through.

Lord Howard of Rising: My noble friend Lady Noakes forgets the huge effort this side of the House put in the January before last to get the Banking Act through in record time to assist the Government.

Lord Davies of Oldham: I certainly accept that point on the Banking Act. We all recognise that, but it is against a background where the Government were being constructive in their response to the nature of the problem. I give credit to the Opposition on the Banking Act: there was considerable assistance there. Yet no opportunity was lost to suggest a failure of government, when in fact Northern Rock presaged what we then saw of the great difficulties with American banks and subsequently with the British banking system.
	I emphasise that it will not do for the Opposition to suggest that what went wrong at that time was something different, separate and unique-the result of the institutional structure operating in Britain at that time. That will not hold, even with the point about Canada. I doubt the extent to which the noble Baroness can stretch that example. The institutional structure in Canada is somewhat closer to the system that the Government are proposing in this Bill than it is to the noble Baroness's proposals and her party's position on the situation. I am not prepared to accept that challenge either.
	The issue here is learning from the past and being in a position to make the right judgments, not merely changing the institutional structures. It will not do to move specific responsibilities from one body to another, as the noble Baroness suggests-thereby suggesting, in passing, her criticism of the Government because blame attached to the FSA indicates that the structure was at fault. We will not see a significant improvement in the position by just moving the furniture of the institutional structures. The Government are concerned that we learn the lessons of the past with regard to the institutional structure and how it functioned, but guarantee that we have a framework in which its judgments are more effective and accurate in the future. After all, the main institutional functions-those of a central bank, a financial regulator, and a financial and economic ministry or Treasury-are central to the maintenance of financial stability in every major economy. They may reach different positions on the nature of their institutions but they all have those three concepts to underpin their approach to financial stability. The United Kingdom position is no different from that.

Lord Hodgson of Astley Abbotts: Would the Minister agree that the major cause of this, the devil in this country, was asset price inflation-the bubble? Who in this new, glorious world that lies ahead of us is going to be responsible for stopping that in future?

Lord Davies of Oldham: It is clear that we need maximum insight, intelligence and appreciation of the factors that led to the bubble creating the crisis. This Bill indicates how the three institutions that I just identified are bound to play their part. The three functions have to be fulfilled in every economy with regard to financial stability. The essence is to make sure that they work effectively together to guarantee that we do not repeat weaknesses of the past. Clearly the communication and understanding between them about the development of that bubble was why the catastrophe occurred.
	Therefore, we conclude that the tripartite model is the right one. We intend to remain committed to the approach of having a single, independent financial services regulator in the form of the FSA, but it has to work better and we intend that it will. The council builds on the existing model, which the Government continue to believe is the right one, but it will bring real improvements compared with the old standing committee functions. Most importantly, it places financial stability arrangements on a more formal, transparent and accountable basis. We will make sure that there is more formality, for example, because the terms of reference are in the Bill laid before Parliament. We will make sure that there will be more transparency, as there will be quarterly strategic discussions which are publicly minuted.

Lord Howard of Rising: Perhaps I may ask the Minister the question that I asked the noble Lord, Lord Myners, when he was here. Why, when almost every organisation in every country throughout the entire world runs a single chain of command rather than dividing it into three, should it suddenly work so well for him when he divides his chain of command into three?

Lord Davies of Oldham: Why does the noble Lord think that under the structure there will be a chain of command of three equals? When I have finished describing how it is intended to work, I will indicate-and it is also described in the Bill-where authority lies. His model, to which I imagine he, as a loyal Back-Bencher, and his Front Bench subscribe, also has divided command. Who is meant to be the decision-taker under the Conservative model? Is it the Governor of the Bank of England or the Chancellor of the Exchequer? Within the framework put forward by the Opposition, is there not a bifurcation of function and therefore the potential for collision of command? The noble Baroness shakes her head, but she is going to resolve that situation in the same way that we are with regard to the tripartite position; namely, it will be essential that the structure is open and accountable, and the three will have to work together in terms of effective co-operation. Of course, each organisation will have a single command and clearly defined responsibilities, but we are guaranteeing that we will set out in the framework of the Bill the constraints of partnership required to resolve that issue. There will be a need to work together-something that manifestly failed with regard to the FSA and the other organisations during the build-up to the last financial crisis.
	I was going on to indicate that the third dimension that we are concerned about is accountability. The annual report on the council by the Treasury will enable full parliamentary scrutiny each year of the progress by, and work of, the council. That will underpin the structure in an open and accountable way and help to produce the remedies to the situation that obtained in the past. Within this framework I also want to emphasise that, even under the model that has been put forward by the Opposition this evening, the crucial issue will still be the exercise of judgment. It will not be the institutional structure that is crucial but the judgment to which it gives effect. We maintain that the FSA still has a valuable and important role to play within the structure-a role greatly advanced by the framework that the Bill creates in relation to all three institutions. The Bill creates a much more formal structure. It establishes a Council for Financial Stability to replace the standing committee and its membership is clear: the Governor of the Bank of England, the chairman of the FSA and the Chancellor as chair. Within that framework and following our White Paper, the Bill indicates the lessons which needed to be learnt from the crisis which we have all been through and which has been so painful for the economy and for our people. Building on that, we will create a structure which, in Clauses 1 to 4 of the Bill, is absolutely crucial and which I defend, advocate and propose.

Baroness Noakes: I cannot let the Minister's long reply go unanswered because there are important points on this clause and the other three clauses dealing with the Council for Financial Stability. The noble Lord, Lord Newby, challenged me on why three-quarters of the people he met did not believe in the prescription put forward by my party. I cannot say whom he meets in the City, but that is perhaps reconcilable with the view of my noble friend Lord Trenchard that three-quarters of the people do not think that the FSA is effective.
	If you ask people in the City whether they want change, on the whole they say no, and that they prefer the devil they know. But if you ask another question about whether there is a joined-up approach between macro and micro-prudential, they will agree with us. It depends which question is asked and it depends whether they want the FSA to be abolished or whether they want more effective macro and micro-prudential regulation. They are different aspects of the policy. I accept that there can be different views. We say that the most important thing is the joining up again of macro and micro-prudential supervision. I apologise to my noble friends who cannot bear those terms; I have got rather used to using them. Although I accept that they are inelegant, they have meaning to those of us who have learnt how to use them.
	I say to the noble Lord, Lord Whitty, that I am sorry if he misunderstood what we are trying to say about consumer protection. I think he suggested that our proposals for a new consumer protection authority would have no leverage and no authority. That is absolutely not what we wish to create. Putting consumer protection and prudential supervision together means that probably neither is done completely effectively. We certainly believe that consumer protection masked the other. That is why we believe that we will have better consumer protection with a dedicated consumer protection agency. It is not our desire to create a weak piece of the system; our intention is to create something that is a strong part of the system. I hope he understands that.
	I thank my noble friends who have spoken, all of whom have supported the fact that the FSA failed, the tripartite arrangements failed and this Bill has a cosmetic response. The Minister seems to be in denial about that. He said that our policies would have a bifurcation function, but that is not so. We are reuniting macro and micro-prudential supervision. The Government's proposals keep them apart. The Minister has not rebutted our charge that these are merely cosmetic changes which create no change in substance. We will return to these clauses at another time, either on the Floor of this Chamber or in the process that we discussed earlier, known as wash-up. That is all I have to say on Clause 1 stand part.
	Clause 1, as amended, agreed.
	Amendment 11
	 Moved by Lord Hamilton of Epsom
	11: After Clause 1, insert the following new Clause-
	"Report on structure of UK financial system
	The report referred to in section 1 shall-
	(a) analyse the current structure of the UK financial system with particular reference to the risks that the system carries for the United Kingdom,
	(b) identify whether any changes would be desirable and, if so, what the practical implications of those changes would be,
	(c) identify whether there are any issues arising from the financial systems operating in different countries and territories, including any proposals for changes to those systems."
	Amendment 11 agreed.
	Clause 2 : Proceedings of the Council
	Amendment 12
	 Moved by Baroness Noakes
	12: Clause 2, page 2, line 19, at end insert-
	"( ) The Council must publish its meeting dates at least 12 months in advance."

Baroness Noakes: My Lords, this is a rather shorter topic than my last one. The amendment would add a new subsection to Clause 2. Under Clause 2(1) the Council for Financial Stability must meet in each quarter of each calendar year, which is a rather curious formulation. It could mean that the council met at the end of one quarter and then again at the beginning of the next, with perhaps only a few days between so-called quarterly meetings. I hope that in practice the council will not meet in this way. My amendment would give transparency to meeting dates by requiring the council to publish them at least 12 months in advance.
	There is a substantive reason for making meeting dates well in advance. The Bank of England's Monetary Policy Committee is required to meet monthly and the outcome of those meetings is watched carefully by financial markets. The Bank, being mindful of that, publishes the meeting schedule of the MPC well in advance. The meeting dates of the MPC are already well known for 2011. The meeting dates for the Council for Financial Stability may never have the high drama of the monthly decision on interest rates. The minutes of the first meeting that I have seen have nothing in them to interest markets, let alone move them. Nevertheless the topics discussed could become much more relevant to financial markets over time if, for example, it was clear that the council was watching excessive leverage building up or was considering actions necessary to counter it. It is just as likely to be on another topic, but I cite leverage because we are familiar with it as an issue from the recent financial crisis.
	If the way in which the council works becomes part of the framework of information which markets look to, some certainty about its meeting schedule would be highly desirable. That is what has been suggested by the British Bankers' Association. I hope that the Minister sees the sense of that. I beg to move.

Lord Davies of Oldham: My Lords, I salute the keenness with which the noble Baroness greets the council, in that she wants the dates well in advance and scheduled as early as possible. Of course we share the same ambition for early scheduling of quarterly meetings, and the terms of reference indicate that they should be scheduled well in advance. We have a little concern about a statutory requirement to schedule them 12 months in advance. After all, there might be global economic or political events that make the proposed dates difficult. We do not believe that a statutory requirement is appropriate. The terms of reference are a more appropriate vehicle for such procedural matters. If the noble Baroness persists and indicates in her wind-up that she feels very strongly about this, I would recognise that the terms of reference could have a firmer commitment and we might reconsider this in drafting the final version, with the intention of a more significant form of schedule than the one that dissatisfies the noble Baroness at the moment.

Baroness Noakes: The Minister seems to have had a transformation over the past few minutes now that we have moved on to Clause 2. Perhaps it was Clause 1 that he could not quite cope with. I was going to return to the attack to explain the difference between quarterly meetings and others that might take place, but since he has been so helpful in his response, I am sure that it can be dealt with appropriately. I therefore beg leave to withdraw the amendment.
	Amendment 12 withdrawn.
	Amendment 13
	 Moved by Baroness Noakes
	13: Clause 2, page 2, line 22, at end insert "and publish its response to those risks, whether in its minutes or otherwise"

Baroness Noakes: My Lords, Amendment 13 concerns the reports published by the Bank of England and the FSA dealing with risks to financial stability. Under Clause 2(2) the Council for Financial Stability must consider any such reports at its next quarterly meeting. I shall leave aside the leisurely approach to risks that this timetable implies. I would hope that if the FSA or the Bank of England produced a report which highlighted serious risks, perhaps imminent risks, the Council for Financial Stability would not sit back and content itself with the fact that a meeting was already scheduled for, say, two months' time. Clause 2(6) allows the council to meet more often than quarterly and we have to hope that the council would meet when necessary. As I understand it, the shadow council is already meeting more than quarterly.
	My amendment merely says that the council must publish its response to the risks identified in a report from the FSA or the Bank of England either in the minutes of its meetings or otherwise. The importance of ensuring that the response of the council is visible is that this element of response was clearly absent from the way in which the tripartite authorities operated.
	I have referred already this evening to the Minister in another place, who said:
	"What we are doing through the Council for Financial Stability is formalising arrangements that have already been in existence".-[Official Report, Commons, Financial Services Bill Committee, 8/12/09; col. 5.]
	It is clear that the Bank of England's warnings on excessive debt, as set out in its financial stability review, were not acted upon. It is also true that the Bank did not make a big fuss about it, but the warnings were there, however sotto voce, and the tripartite authorities ignored them. We have to be sure that the Council for Financial Stability does not make that mistake again.
	When this amendment was debated in another place, the Minister said that it was unnecessary because all this is dealt with in the terms of reference, which will be issued under Clause 1(5), which we debated earlier. I put it to the Minister that that is not an adequate response. The terms of reference are subject to no parliamentary procedure and will say whatever the Treasury wants them to say from time to time. But let us assume that the current draft of the terms of reference represent what the Treasury intend to issue formally if this Bill becomes law. Does it do what my amendment asks for?
	Perhaps I may read what the terms of reference say at Annex A about minutes. It states:
	"Minutes of the quarterly meetings of the Council dealing with strategic matters will be published. These will be the meetings where, amongst other matters, the Bank's FSR"-
	the financial stability report, "the FSA's" financial risk outlook-
	"and the annual report on the"-
	Council for Financial Stability-
	"will be discussed ... A final minute to be published no later than one month after the meeting ... As necessary, minutes will attribute comments to individuals ... Discussion of all matters involving firm-specific or market sensitive issues will not be included in published minutes".
	There is absolutely nothing in the terms of reference which requires the minutes to be substantive.
	Anyone who has experience of boards, whether in the public or the private sector, will be aware that there is a spectrum of minuting practice. At one end, there is the blow-by-blow account of what was discussed. At the other extreme, there is the minimalist school, which records not much more than the headings of any papers discussed, together, where necessary, with the formal decision.
	Under the terms of reference, the minutes could be anywhere on the spectrum. My amendment seeks to ensure that the minutes contain the response to risks identified by reports which the council considers. These minutes will be a public document and the Government have stressed that they are an important component of transparency. As we have debated earlier today, the Government have claimed that transparency is one of the key features of the new arrangements, but the Bill does not ensure that, in this key area, the council's response to risks is achieved. I beg to move.

Lord Higgins: My Lords, Clause 2(2) is very strange in several respects. It suggests:
	"Where the FSA or the Bank of England publishes a report setting out its opinion of the risks to the stability of the UK financial system, the Council must consider the report at the ... next quarterly meeting".
	Is it not for the council to decide whether there are risks to the stability of the UK financial system, rather than the Bank or the FSA? If the idea is to have a tripartite arrangement, surely the three of them and the council, as such, should express a view on the fact that there are risks to the stability.
	Secondly, should these bodies publish a report on "a risk" to the stability rather than "the risks"? Will they publish a report every quarter, every six months or whatever, and say, "There are risks to the economy; these are they"; or will they specifically say, "We foresee a particular risk", which I would have thought would be the more appropriate way of doing it?
	At all events, in relation to my noble friend's amendment, surely it is not enough to go through the procedure here and then, the report having been considered by the council, for the council not to say what it proposes to do about the risks that have been mentioned. Presumably it will not simply sit there and say, "We have received this report. There are risks to the UK economy", and that is it. My noble friend's amendment is entirely appropriate.

Lord Hodgson of Astley Abbotts: My Lords, I, too, support my noble friend's amendment for the reasons outlined by my noble friend Lord Higgins. To have different risks put up by different groups is a recipe for disaster and misunderstanding. We need a unified approach and a unified response. One of the problems in the background to the crisis we have had was that businesses, whether in the wider economy or financial services, were not clear as to exactly what the risks were. There were different views of what the risks were. Therefore, a clear statement of what the response to the risks should be would send a signal to the country-whether within the City or within industry at large-on the dangers that lie ahead and what the council believes is the appropriate response. It is a way to stop bubbles growing as it enables a clear response to be made to them.
	The Minister was generous in his response on Amendment 12. I cannot see why he cannot be generous in response to this amendment too. It is very important to get clarity in this area so that everyone is at exactly the same place in the economic cycle.

Lord Davies of Oldham: My Lords, I hesitate to stretch the concept of generosity at the Dispatch Box too far, although I hope to give a constructive response.
	We certainly share both the ambition outlined by the noble Baroness in her opening speech and the position put forward by the noble Lords, Lord Hodgson and Lord Higgins. In our concept, the quarterly meeting exists to provide transparency through the minutes of the council's deliberations on strategic issues that are in the wider public interest; it will consider the risks. That is the point that the noble Lord, Lord Higgins, emphasised. It is the responsibility of the council to discuss these matters. The Government are clear that they want the council's assessment of risk, and its consideration of possible actions and options for mitigating the risk, to be open to the public. That is the concept behind the openness of this operation.
	The terms of reference of the council, which we have published in draft, stipulate that such reports by the Bank and the FSA must be considered in three ways: a summary of the report must be discussed; the risks must be assessed; and the council must consider its response, including what options for mitigating action should be taken. All these issues will be part of the council's report because they will have been discussed and minuted. I therefore do not think that the Government's approach is vastly different from that intended by the noble Baroness.
	As an additional constructive point, I can offer to commit that the minutes will cover the substantive items on the agenda and that the terms of reference will be updated to reflect this. We will then be in no doubt as to what the total responsibility of the council will be. The identified risks and the actions proposed will be in public arena, which is where we and, I believe, the noble Baroness want them to be.

Lord Higgins: The Minister said, "and the actions proposed". That is precisely what my noble friend's amendment is about. However, it is not clear from the Bill that any action will be taken at all.
	If the FSA and the Bank of England produce a report, why is there no provision for a report to the council from the Treasury?

Lord Davies of Oldham: If the noble Lord is saying that there is no obligation to produce a report on action not taken, that is of course the case. However, if action is taken, it will be in the minutes of the council and therefore in the public domain. I do not see any objection to the way in which the council is expected to act or to the way in which the nation will be able to see both the assessment of risks and the action taken-if any there is-recorded in the minutes. I cannot really see, therefore, the nature of the anxiety of the noble Lord, Lord Higgins.
	We are seeking to emphasise what after all is an underpinning concept of the council: that it must be open, transparent and accountable. I have described a structure which has the same objective as the noble Baroness. I understand that she thinks that we should go about it slightly differently, and I have said that we may update the terms of reference to take account of the position that she set out in her amendment.

Baroness Noakes: We could carry on debating the transparency that may be achieved for the Council for Financial Stability for a good long time, but I do not think that it would serve the interests of Members of the Committee. I shall read carefully in Hansard howthe Minister has offered to take this forward, for which I am grateful. I beg leave to withdraw the amendment.
	Amendment 13 withdrawn.
	House resumed.

House adjourned at 10.03 pm.